Govt looks into long-term coal links with no end-use limitations for steel, cement sectors

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Govt looks into long-term coal links with no end-use limitations for steel, cement sectors

Announcement 27 Jun 2024 03:34 PM IST The Hindu BusinessLine

The Coal Ministry intends to provide consumers in the non-regulated sector (NRS) with long-term coal links without end-use restrictions. This initiative will help enterprises better plan for the essential resource while increasing the supply of the vital fuel. The development becomes significant because the NRS sector enterprises are involved in the infrastructure sector, including steel, cement, sponge iron, and captive power units.

The government's increased spending in this area aims to increase employment opportunities and strengthen India's manufacturing capabilities. Industries like steel and cement are essential to the sector's expansion. Sources said the Ministry is already “contemplating” the proposal and is holding stakeholder consultations on this issue. The NRS sector has long demanded long-term coal linkages without end-use restrictions.

Besides, the Ministry has been working on expanding coal production and developing logistics support, so more cargo will be available for sale. Having long-term linkages without end-use restrictions will encourage more companies from the NRS sector to procure dry fuel. Accordingly, the Ministry plans to amend the NRS linkage auction policy 2016.

In FY24, the coal mining PSUs dispatched almost 163 million tonnes (MT) of coal to the NRS sector, a growth of around 22% annually. Captive power plants (CPP) accounted for the majority of the despatch, followed by sponge iron, steel and cement.

A senior government official said that coal produced by Coal India (CIL) and Singareni Collieries Company (SCCL) is broadly distributed through a coal linkage or via e-auctions conducted by coal companies. The dry fuel is also distributed to micro, small, and medium enterprises (MSMEs) through state-nominated agencies (SNAs).

Coal linkages to the power sector are granted under the SHAKTI policy and to NRS under the policy for auction of linkages for NRS (2016). Coal through e-auctions (single e-auction window) and distribution through SNAs are governed under the provisions of the New Coal Distribution Policy (NCDP), 2007. The single e-auction window caters to all sectors.

“Thus, coal supplied under SHAKTI policy and NRS linkage auction policy is for specified end uses, while there is no end use restriction for coal supplied through e-auctions. Hence, long-term coal linkages to NRS consumers without end-use restrictions may not be possible under the present NRS linkage auction policy, and an amendment will be required for the NRS policy,” the official explained.

Another senior official pointed out that, given the current and future market dynamics, higher availability, and the need to reduce coal imports, a fresh look at the current arrangements of coal supplies to the NRS sector is needed to move ahead from a regime of auction of coal linkages for not only specific end uses but also for coal consumers without any specific end use.

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Govt looks into long-term coal links with no end-use limitations for steel, cement sectors

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