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Last Updated : Jun 15, 2016 02:00 PM IST | Source: CNBC-TV18

Coal India allots coal linkages to Tata Sponge

DP Deshpande, Managing Director of Tata Sponge, said that coal linkages secures the company for the next five years at 24,000 tonnes per year.

Coal India has allotted coal linkages to Tata Sponge for a period of five years. Confirming the allotment the DP Deshpande, Managing Director of Tata Sponge, said that coal linkages secures the company for the next five years at 24,000 tonnes per year.
 "The letter of allocation is yet to be received but we have successfully bid,"  he said.

He told CNBC-TV18 that the company's requirement stands at 3 lakh tonne per year, most of which is imported. He added that the company will get superior grade coal at Rs 3,000 a tonne.

Coal India linkage secures Tata Sponge for 10 percent of its coal requirement, Deshpande said. He asserted that the linkage doesn't give the company price benefit but improves visibility.

Below is the verbatim transcript of DP Deshpande’s interview with CNBC-TV18's Nigel D'Souza and Reema Tendulkar.

Nigel: Could you confirm first, CNBC-TV18 learns that Coal India has allotted coal linkage to Tata Sponge. Could you confirm that details, could you tell us if it is for a period of five years, what exactly is the duration?

A: Government of India had organised to allocate certain mines for linkage auctions for sponge iron industry. We are part of the sponge iron industry, so we also participated in the bid auction and we have been successful in sourcing some part of coal from one of the coal mines for Tata Sponge. The letter of allocation is yet to be received but we have successfully bid.

Reema: What could be the quantum of coal that you could get from this auction as well as the price?

A: The price is the base price that the government has fixed which is around Rs 3,000 per tonne kind of a grade that we have been looking for. Our is a superior grade coal. We have got about 24,000-25,000 tonnes of coal successfully bid and secured for ourselves against our total annual requirement of coal which exceeds 300,000 tonnes.

Nigel: So, you are saying that your total requirement per year is 300,000 tonnes. Just to confirm this are you importing most of that coal requirement, the 300,000 tonnes that you require?

A: Yes, our current sources are imported sources.

Nigel: Currently you are totally importing all that coal?

A: Yes.

Nigel: And what is the landed cost of importing that coal, roughly?

A: We import what is known as RB1 coal from South Africa currently and it comes to around USD 55 or something. I don't remember the exact price.

Nigel: USD 55?

A: Around USD 55.

Nigel: And this coal linkage that you have signed this is for what quantity?

A: This is for about 24,000 tonnes only.

Nigel: 24,000 tonnes for the full year?

A: For the full year, for every year for the next five years. That is the arrangement.

Nigel: So, this is less than 10 percent of your total coal requirement?

A: Yes, we would be participating more such sources. We hope that the prices will also fall for the linkage auctions. So, we have not gone whole hog to secure 100 percent of our requirement.

Reema: You said that the base price was Rs 3,000 per tonne but yours is a superior grade coal. So, for your grade could you at least give us an average sense of what the price could be?

A: The notified price was Rs 3,000 and we asked our coal source for about Rs 3,000 and we have got one.

Reema: How much cheaper than would it be compared to the imported price of USD 55 per tonne?

A: In our current estimates the imported coal price and imported coal source is the cheaper source compared to the current Indian sourcing because of current evaluation. However, we still need to have a supply chain which is securing and creating alternative sources of coal.

Reema: So, it is not going to give you any price benefit but it gives you visibility?

A: Yes.

Nigel: Could you tell us what has been the trend in terms of sponge iron prices? In the last quarter the average realisation that you got was around Rs 12,500 to around Rs 13,000 per tonne or thereabouts what has been the trend? We saw a bit of a spurt in April but I think prices have corrected; if my channel checks tell me in the last week, in the last one month we have seen some kind of pressure on sponge iron price, could you confirm that?

A: Prices have been under pressure. Prices are not as good as they were before in the last quarter. However, prices are also now showing up, so there has been a pressure but I think the pressure is getting released or price flux stabilising.

Nigel: Comparing average price in this quarter to last quarter are price is down by 5-6 percent could you give us some number or range at least?

A: I would not have ready numbers on this just now but the prevailing prices that I saw in the last 15 days were closed to Rs 11,000 as against the Rs 12,500 I reported last time.

Reema: You said that you will be interested in keen to participate in the next auction of coal linkages. Part I - when do you think the next auction will be and secondly, right now you have tied up 8 percent of your requirement 24,000 out of a required amount of 3,00,000 how much more in percentage terms would you like to get to tie up?

A: It depends on the international coal market etc. It is very difficult to say just now otherwise we could have tied up the entire coal right now itself.

Nigel: When is the auction of the next linkage sir?

A: It is after six months from now.

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First Published on Jun 15, 2016 01:45 pm
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