Coal India's import substitution drive gathers momentum

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As a result of state-run Coal India Ltd’s (CIL) drive for import substitution, imports by domestic coal-based power plants declined by 55 percent till January to 9 million tonne (MT) compared to 20 MT during the same period last financial year.

Coal India said in a statement that coal consumers had opted for around 71 MT of indigenous coal ending February of FY21. Predominant among them was a robust 43.5 MT increase in e-auction bookings during April to February period compared to the same period in 2020, CIL said in a statement on March 2.

Interestingly, bookings under special forward auction, meant exclusively for power sector consumers, at 33 MT during April-February posted 27 percent growth over the same period in 2020. The increase in real terms was 7 MTs against 26 MTs of 2020.

Power Sector consumers, who benefitted from the import substitution drive include CESC, Andhra Pradesh Power Development Corporation, Adani Power and GMR group. Non-regulated sector (NRS) consumers include Vedanta, Jindal Steel & Power, NALCO, Hindalco Industries and Tata Steel BSL.

The slew of measures undertaken by CIL include allowing its coal companies to sign memorandum of understandings (MoUs) under import substitution with 17 power plants linked with them. Additional coal was offered to the non-regulated sector (NRS) against fuel supply agreements up to 100 percent of annual contracted quantity (ACQ). The trigger level for the power sector also increased from 75 percent to 80 percent.

ACQ for power plants was enhanced to 100 percent of normative requirement from 90 percent. Additional coal was allocated to state and central generating companies under flexi utilization policy enabling them a reduction in coal imports.

CIL also waived off performance incentive to the consumers of the power sector, for the supply of coal beyond the trigger level since the beginning of the fiscal. This helped the consumers opting additional quantities of coal at lower cost from CIL, the company said.

“These coordinated efforts of CIL, apart from 43.5 MT of increased bookings in the e-auction, helped arrest the imports by further 28 MT,” said a senior executive of the company.

Had CIL not launched such measures the choice for consumers would have been to reach out for imported coal. Small consumers and traders who do not have long term contracts with CIL opt for e-auction sales with the other alternative being imported coal.