coal insights, june 2016

4 Coal Insights, June 2016

COnTEnTs

12 GMB to focus on containers, cement to offset coal dependence

18 KoPT steam coal handling may fall 15% mt in current fiscal

27 Port rail logistics a lifeline to India’s future

32 Jharsuguda-Barpali rail link to be operational from July

33 Steam coal offers steady in June 34 Coking coal offers witness mixed trend in

June 35 India’s April coal production down 30%

m-o-m 37 CIL kicks off linkage auction 40 India adds 1,260 MW power generation

capacity in April 41 India’s April cement output down 7.94% 42 CIL cuts higher grade prices, ups lower

grades rates 50 Industrial pumps sales may cross

`7,000 cr in 2017 52 Corporate Update 54 GSI to unveil grade-wise coal reserves

spread in India 57 Coal handling by major ports up 25.6%

in May m-o-m 58 Railways’ April coal handling down

12.3% m-o-m 59 Pitfalls of external heat sources 70 E-auction data 65 US power sector coal consumption

estimated to fall 10% in 2016 66 Is Colombia shifting coal exports

goalpost to India? 72 Port data

68 | INtERNAtIoNAlWill firmness in crude oil prices impact coal miners?The spurt in crude prices might lead to firmness in international coal prices and ocean freights.

48 | INtERVIEWCoke price rally to sustain for 3-6 monthsDomestic coke prices spurted of late because of the lack of supplies in China, says Arun Jagatramka.

55 | ExpERt SpEAkUMPPs near coalfields to light up futureIndia’s energy sector is on a take-off point, feels V K Arora.

44 | INtERVIEWBig Brother’s Watching!MCL’s surveillance measures have markedly reduced pilferage, says Deepak Srivastava.

6 | CoVER StoRY‘DFC will be freight logistics game-changer’India’s new connectivity projects nearing completion will change the face of coal logistics in the country.


COvER sTORy

‘DFC will be freight logistics game-changer’

For centuries India did not properly utilise her long coastal regions for maritime purposes. But, at a time when

logistics seems to hold the key to a reduction in not only the cost of production but increasing efficiency too, connecting the mines with the end-consumer has assumed paramount importance. Transportation through coastal shipping and inland waterways not only opens up new avenues for commercial traffic, but are also environment friendly ways for decongesting Indian roads. Indian Railways could be a vital link in this grand connectivity plan.

A macro approach towards utilising coastal shipping through the `4 lakh crore Sagarmala Project is an apt approach in ensuring optimum resource utilisation.

This issue of Coal Insights captures the status of various new connectivity projects under way. As these projects near completion, the authorities assert they will change the face of coal logistics in the country.

Connecting the unconnected could be the mantra now.

Coal Insights, June 2016 7

COvER sTORy

What is the current status of the dedicated freight corridor (DFC) project? How much of the work has been completed on both corridors?

Where the current status of the eastern dedicated freight corridors (EDFC) and western dedicated freight corridors (WDFC) is concerned, these are moving at a much faster pace since the last 15 months. The last year-and-a-half has seen

major progress not only in the award of civil, electrical, S&T and other contracts in Dedicated Freight Corridor Corporation of India (DFCCIL) but also in the physical progress of work at site.

Contracts worth `25,098 crore have been awarded/signed since January 2015 as against contracts worth`13,000 crore finalised during the last 6 years.

There has been a 5-fold increase in the

progress of earthwork and concreting in the Rewari-Iqbalgarh section of WDFC as well as in the Khurja-Kanpur section of EDFC.

There has been a 3-fold increase in capital expenditure at `8,516 crore in 2015-16 compared to `2,885 crore in 14-15.

Where awarding of contracts is concerned for EDFC, civil contracts for 66 percent length have already been awarded and work is in progress on the Khurja-Kanpur (343 km), Kanpur-Mughalsarai (402 km) and Mughalsarai-Sasaram (126 km) sections.

Contracts for a further 225 km are likely to be awarded in June 2016. Work for mechanised laying of tracks with the new track construction (NTC) machine has started in Bhadan, Maitha and Daudkhan.

Electrical, signalling and telecommunication contracts for the Khurja-

Once the dedicated freight corridors become fully operational, the average speed of freight carriage by rail is expected to more than double from the existing 25 kmph to 70 kmph,

leading to guaranteed transit times. The unit cost of transport is also expected to reduce by 40 percent. An average of 6 trains per hour can be run on the Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC) while the requirement of wagons/locos will come down due to better utilisation of assets as the average speed will improve 3-fold, Adesh Sharma, Managing Director, Dedicated Freight Corridor Corporation of India (DFCCIL), informs Kingshuk Banerjee of Coal Insights. In coal, combined freight volumes are expected to increase across both corridors from 106,737 tons in 2016-17 to 166,377 tons by 2036-37, a growth of 56 percent. Excerpts from an interview.


What steps or technological innovations have been adopted by Mahanadi Coalfields (MCL) to deal with coal pilferage?

We have undertaken several measures. These include the following.

First, we have installed GPS-based vehicle tracking system (VTS) and geo-fencing of mining areas to prevent pilferage of coal. Around 1,800 coal-carrying tippers operating in the mining areas of MCL have been fitted with GPS/GPRS and a dedicated portal, www.mclvts.in, has been developed for monitoring of the VTS. Also, system-driven reports have been designed to get information on the number of trips, paths travelled by the tippers (lead) and contract-wise and tipper-wise route violations.

“Geo-fencing” of mine areas has been done in the said web portal to prevent coal theft. Installation of GPRS-based VTS has enhanced greater transparency and effective monitoring of coal transportation and is also ensuring correct payments made to the transport contractors based on the leads

(distance) recorded by the dedicated portal. The other advantages of this e-initiative

have been online monitoring of movement of coal-carrying tippers, thereby increasing the efficiency of transportation of coal.

A tender for procurement of an additional 3,483 VTS for installation in all heavy earth-moving machineries (HEMMs), including all overburden (OB) carrying dumpers and coal tippers, has been floated recently.

Secondly, we have implemented monitoring and e-surveillance units in enhancing operational efficiency and combating corruption. Enhancing greater transparency in loading and transportation activities in the mine areas through electronic surveillance have been our focal point. For this purpose, 44 CCTVs and 91 IP cameras have been installed. Nine control rooms have also been set up at area-level for monitoring of e-initiatives.

Further, an e-surveillance and monitoring unit has been set up centrally

InTERvIEw

Big Brother’s Watching!

at MCL headquarters. Five IPCs have been kept on standby for the in-motion weighbridges (WBs). This has been yielding positive results in terms of improved transparency in the various mining operations, curbing corruption in the process.

This has also resulted in close monitoring of coal quality and quantity with reduction in the loading time of railway wagons from 5-6 hours to 3-4 hours, leading to a control on the demurrage charges borne by MCL.

In addition, 35 CCTV cameras have also been installed at the entry/exit points of the coal mining projects and at the magazines of MCL. Work order has also been issued for 376 CCTV cameras (for the installation of 21 IP PTZ, high definition, day/night wide dynamic range dome cameras and 355 high-definition IP box/bullet cameras for outdoor and indoor installation) at 9 regional stores and 2 central stores of MCL. The said installation of the CCTV cameras would be very handy in censoring pilferage of coal/materials from the company’s premises.

Lastly, the company has introduced in-motion road weighbridges with RFID which have been connected to Coalnet. In-motion weighbridges with RFID/IP cameras have ensured weighment of more than 800 tippers in one shift as against 200 tippers previously through electronic static weighbridges. This has resulted in drastic increase in the coal weighment percentage from 10-15 percent to 85-90 percent at present, thereby reducing the chances of adjustment in manipulations in coal production figures on a daily basis. The use of RFID tags and RFID readers has ensured entry of authorised coal tippers only inside the mine boundaries. IP cameras in electronic and in-motion weighbridges have led to increased surveillance on all the coal tippers for cross-checking the entry of RFID tags installed coal tippers.

Coalnet has ensured real-time transmission of coal weighment data to the central server. This has further reduced the chances of fudging of coal production figures on a day-to-day basis.

Thirty-five in-motion weighbridges are currently fulfilling our needs, the balance 5 are kept as standby and would be installed wherever requirement arises in future, due to shifting of mines.

Coal India subsidiary Mahanadi Coalfields Ltd (MCL) has introduced a slew of measures that have markedly reduced pilferage, injecting a

strong dose of efficiency within the company, at the same time. The measures include a GPS-based vehicle tracking system (VTS), geo-fencing of mining areas, monitoring and e-surveillance units and introduction

of in-motion road weighbridges with RFID that are connected to Coalnet. Such pioneering measures have resulted in increase in the availability of coal at railway sidings from the previous few lakh tons to a sizeable 8.5 million tons (mt) currently and 75-80 percent reduction in incidences of petty coal theft in bags from the sidings. Effective monitoring of security systems at entry/exit points have prevented entry of unauthorised vehicles and persons. Furthermore,

Coalnet has ensured real-time transmission of coal weighment data to the central server, reducing chances of fudging of coal production figures on a day-to-day basis, Deepak Srivastava, Chief Vigilance Officer, MCL, tells Madhumita Mookerji of Coal Insights. Excerpts from an interview:


What is the reason for coke prices spurting to $190 per ton from a low of $115 within 2 months?

People are saying that China does not have coke. It has exhausted its coke. Its port stocks are low and today Noble’s vessel is waiting for loading, but no one is ready to load. Look at the ground reality, they are not honouring their export commitments after prices started moving up. In reaction to that, coke prices jumped. The impact of that was witnessed in the Indian market immediately. People were selling domestic coke at `11,000 per ton and now they are selling at `15,000 per ton.

But are people buying at `15,000 per ton?

Yes, they are buying in small quantities.

What is the current market situation as far as steel and coke are concerned?

In steel, as I said, there are some symptoms of improvement, mainly because of the drought. Otherwise, demand is not weak. And in coke there is a sharp improvement.

Will the rally in coke sustain?

It will sustain for at least 3-6 months. In coke, any bullish trend rarely last for more than six months. Right now the upward trend has been there for the last one-and-half months and it should last for another four-and-a-half months. It started from end of April.

What is your coke plant’s capacity utilisation?

We have brought some coking coal and will run the plant at slightly better capacity in June and from July the capacity utilisation should be at 50 percent. In June, we will operate at 30-40 percent. In June, we will be producing about 15,000 tons. We were producing 3,000-4,000 tons till April and May and in July we will reach 30,000-50,000 tons. We have already brought that much coal.

Hopefully, the market should improve.

What was your loss/profit in the Australian coking coal mine you sold to JSPL?

There was nothing called loss or profit in that. It was a total write off.

What is your take on domestic coke prices?

Domestic coke prices are `15,000 per ton at present on the west coast. These are up by `4,000 per ton. I never focus on anything beyond six months. Because beyond this, any forecast will always be wrong. But, people actually like to listen to wrong forecasts!

The minimum import price (MIP) was imposed in February this year. Has there been any positive impact of this on domestic steel-makers?

See, there was definitely an immediate improvement. Especially in March and

Coke price rally to sustain for 3-6 months

till the middle of April. From mid-April and the whole of May, I think, the entire industry has suffered because of drought, particularly in western India. Because of the drought, activity has practically come to a standstill. Everyone is waiting for the monsoon. Generally, during monsoon, construction activity falls. But, this year, we are expecting it the other way round.

What is your take on the bank NPAs?

I had sought a 12-18 month moratorium around a year back. But now it is a bit too late though it is valid even now. Today the accounts have become NPAs at most of the companies because of the excessive overdrive from the banks. Basically, today the problem is because of media hype… Aur tax payers ka paisa barbaad ho raha hai (tax payers money has been wasted).

Have you ever questioned yourself who are the tax-payers? In fact, the major tax payers are corporates! Whoever is paying indirect tax, by definition, is corporate. A non-corporate will not pay indirect taxes like customs, service or excise… it is paid by corporates.

As far as income-tax is concerned, as much as 60 percent is direct corporate tax. Even in the remaining 40 percent, as much as 70 percent, be it is my salary or yours, is being paid by the corporates. So the media hype that was created should be ended by the media itself, because it came from bailing out banks in the US in 2008. And, in that bailout, it was said that tax-payers’ money should not be used to bail out banks. And that was because of the fact that the banks were on excessive overdrive as they were lending at zero percent margin, lending at below cost etc.

Here in India, the slowdown set in after the 2010 Commonwealth Games. What have you done to address that slowdown? In 2015, the industry would have revived, had the banks been involved in reviving the industry, instead of maintaining their accounts as standard accounts on a month-to-month basis. There was pressure on them and that was a wrong pressure.

You have sufficient mechanism today with concurrent audit and forensic audit etc in place… they could have easily identified the accounts where wrong was committed.

Domestic coke prices spurted of late because of the lack of supplies in China, which boosted rates by `4,000 per ton. However, Arun

Jagatramka, Chairman & Managing Director, Gujarat NRE Coke Limited, tells Rakesh Dubey of Coal Insights that any rally in coke prices does not last for more than six months

InTERvIEw

Coal Insights, June 2016 55

addition alongwith matching investments in distribution and transmission.

RenewablesWhile there is pressure on the government to discourage the use of fossil fuel for generation of electricity in the coming years, India has taken up very ambitious targets for renewables. The target for Green energy is 175 GW by 2022. The target for solar has been fixed at 100 GW, comprising 60 GW in terms of large and medium grid connected power and 40 GW as rooftop solar. The target for wind energy is 60 GW, for bio-

V K Arora

And God said ‘Let there be

light’ and there was light – is an extract from the third verse of the ‘Book of Genesis’ in The Bible.

In the present context, Narendra

Modi, the Prime Minister of India, said, ‘Let there be light in every corner of my country’ and his minister of power said, ‘So shall it be’ and started diligently working towards it.

India’s energy sector is on a take-off point with a committed leadership which is determined to ensure that there shall be no shortage of power in the next few years. While the directive to eradicate power shortages came from the Prime Minister, Piyush Goyal, the Minister of State for Power, Coal and New and

Renewable Energy, has taken the bull by the horns and has committed to tackling the problem on all fronts. This commitment has percolated down to the power and coal companies, including NTPC and Coal India Ltd, transmission companies like the Grid Corporation of India, distribution companies and other entities. For the first time, it has been demonstrated that a committed leadership can do wonders in a sector which had been languishing because of lack of clarity on the policy front.

India’s total installed power capacity is 298 GW (as on March 31, 2016, out of which the renewables’ capacity forms 28 percent and non-renewable, 72 percent.

The present per capita consumption of electricity is ranging around 1,000 kwh which is expected to rise to 2,000 kwh in a few years.

Demand for power is expected to surpass 300 GW over the next 10 years. This would involve a 5-10-fold ramp-up in capacity

India’s power sector: How long will be the dependence on coal?

Ultra-mega power plants near coalfields to light up future

ExPERT sPEAk

Renewable Energy, 13%Hydro, 15%

Nuclear, 2%

Natural Gas, 9%

Coal, 61%

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Coal Insights, June 201674

coal insights, june 2016

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