SUMMER INTERNSHIP REPORT ON

ASSESSMENT OF INTERNATIONAL COAL LINKAGES

(A CASE STUDY OF JHAJJAR POWER LIMITED)

UNDER THE GUIDANCE OF

DR. ROHIT VERMA, DY. DIRECTOR (NPTI)

MR. SHISHIR SHARMA, ASST. MANAGER, JPL

Submitted by

RAHUL SHARMA

ROLL NO: 1120812248

MBA (POWER MANAGEMENT)

AUG, 2012

Sector-33, Faridabad – 121003, Haryana

(Under the Ministry of Power, Govt. of India) Affiliated to

MAHARSHI DAYANAND UNIVERSITY, ROTHAK

2

DECLARATION

I, Rahul Sharma, Roll No 1120812248 student of MBA (POWER MANAGEMENT) at National

Power Training Institute, Faridabad hereby declare that the Summer Training Report entitled -

“Assessment of International Coal Linkages (A Case Study of Jhajjar Power Limited)” is an

original work and the same has not been submitted to any other Institute for the award of any

other degree.

A Seminar presentation of the Training Report was made on ___and the suggestions as

approved by the faculty were duly incorporated.

Presentation In charge Signature of the Candidate

(Faculty)

Countersigned

Director/Principal of the Institute

3

EXECUTIVE SUMMARY

In India, around 85 % of the electricity is generated from coal. Out of the total coal consumption,

20 % is met through imports. This tendency has to increase, since the increase in coal

production is very slow and thereby making India more dependent on imported coal.

This report broadly focuses on the assessment of imported coal linkages for all power plants

including JPL which are looking to solve their coal shortage problem.

A study has been conducted of the existing and new coal exporting countries like Indonesia,

South Africa, Australia, Mozambique, Botswana & Russia.Assessment of various cost associated

with coal imports viz. freight , carriage,insurance, coal costs, logistics,ports in India and the

sourcing countries etc. has been done. A solution has been proposed for sourcing coal from

various places in the world to reduce the landed cost of coal for the Indian power plants.

The present (June 2012) installed capacity of Indian power plant is 205GW, of which around

116GW is from coal based thermal power plant [1]

. Nearly around 50% of the generated power is

from coal based power plant, but due to various reasons the availability of domestic coal and

their linkages to power plant has been critical nowadays leading to dependency of TPP on

International coal. There are various options for importing coal to India from explored and

unexplored nations. Present trend shows most of the companies are inclined towards importing

coal from Australia and Indonesia, however countries like Mozambique, Botswana and Russia

have been neglected. There are certain constraints like regulations related to coal in the exporting

countries, infrastructure, logistics, supply chain management and the price fluctuation in the

International market that are becoming the deciding factors for sourcing imported coal.

In this project a detailed analysis of importing coal from Indonesia, Australia, South Africa,

Mozambique, Russia, Botswana has been done and a case study of JPL,Jhajjar (a subsidiary of

CLP Power Ltd.) has been done.

[1] SOURCE: CEA

4

ACKNOWLEDGEMENT

Apart from efforts of the person doing the project, the success of any project

depends largely on the encouragements and guidelines of many others. I take this

opportunity to express my gratitude to the people who have been instrumental in

the successful completion of the project.

A special vote of thanks to MR. SHISHIR SHARMA, Asst. Manager, JPL and

also my project guide for his support and guidance during this project.

I also record my sincere thanks to MR.PINKESH, Asst. Manager, MR DANISH,

Asst. Manager, JPL for providing assistance during my project.

I also give my immense pleasure to thank Mr SHARAT KUMAR,DGM(HR) , Mr

ANAND PACHOURI,AM(HR) for giving me this wonderful opportunity .

I feel deep sense of gratitude towards MR. J.S.S. RAO, PRINCIPAL

DIRECTOR, CAMPS (NPTI), MR. S.K.CHAUDHARY, PRINCIPAL

DIRECTOR, CAMPS, MRS. MANJU MAM, DEPUTY DIRECTOR, NPTI, MRS

INDU MAHESHWARI, DEPUTY DIRECTOR, MRS KARISHMA for arranging

my internship at CLP and being a constant source of motivation and guidance

throughout the course of my internship.

I also extend my thanks to all the faculties in CAMPS (NPTI), for their support and

guidance in my project.

Thank you all for being there for me always.

RAHUL SHARMA

5

LIST OF FIGURES

Figure 1 CLP’s Global Presence Areas

Figure 2 Installed Capacity of India

Figure 3 Fuel Distribution of India in Installed Capacity

Figure 4 Location of JPL (Source: UNFCC Document)

Figure 5 Rankine Cycle

Figure 6 Bidding Mechanism

Figure 7 CIL & its Subsidiaries (Coal India Limited-www.coalindia.in)

Figure 8 Coal Fulfillment options for CLP

Figure 9 CCL Mine Areas

Figure 10 Coal data through E-Auction (Source: Ministry of Coal)

Figure 11 Components of Coal’s Landed Cost

Figure 12 World Coal Reserves (SOURCE: – www.worldcoal.org)

Figure 13 Botswana Coal Reserves

Figure 14 Botswana Coal Export

Figure 15 Railway Network of Botswana

Figure 16 Russia Coal Basins

Figure 17 Russian Coal Mining areas and Major Ports

Figure 18 Russia Export Scenarios

Figure 19 Railway Network of Russia (SOURCE: http://eng.rzd.ru/)

Figure 20 South Africa Coal Reserves

Figure 21 Coal Exporting Countries of South Africa

Figure 22 South African Rail Network

Figure 23 Mozambique Coal Reserves

Figure 24 Major Ports in Mozambique

Figure 25 Beira Corridor Railway Infrastructure, Mozambique

Figure 26 Indonesia Coal Reserves

Figure 27 Australia Coal Reserves (SOURCE: www.australiancoal.com.au)

Figure 28 Australia Coal Mine Areas

Figure 29 Railway Expansion plans in Queensland

6

LIST OF TABLES

Table 1 JPL Location Details

Table 2 Coal Quality as per Design for JPL

Table 3 Description of Regions in Rankine Cycle

Table 4 Projects under Case 1 & Case 2 Bidding (SOURCE: CEA)

Table 5 Grades of Non Coking Coal (Ministry of Coal)

Table 6 Coal Classification acc. to GCV

Table 7 Percentage of Coal from Linkages & Open Market

Table 8 World's Top Coal Producers (SOURCE: www.worldcoal.org)

Table 9 Botswana Coal Quality

Table 10 Mozambique & Namibia Port Distance from Indian Ports

Table 11 Number of Days in Transit from various Ports

Table 12 Russian Coal Reserves

Table 13 Classification of Russian Coal

Table 14 Russian Vs U.S Coal Classifications

Table 15 Distances of Russian Ports

Table 16 Distance of Russian ports from Indian Ports

Table 17 No. of Days in Transit of Russian Coal Ports from Indian Ports

Table 18 Coal Grade Specifications in South Africa

Table 19 Distance of Richard's Bay Coal terminal from Indian Ports

Table 20 Mozambique Coal Quality

Table 21 Distance of Namibia Port from Indian ports

Table 22 No. of Days in Transit from Namibia Port to Indian Ports

Table 23 Indonesia Coal Quality

Table 24 Distance of Indonesian Ports and Indian ports

Table 25 No. of Days in Transit for Cargo from Indonesian Ports to Indian ports

Table 26 Australian Coal Quality

Table 27 Major Coal Ports in Queensland, Australia

7

LIST OF ABBREVIATIONS

ACQ Annual Contracted Quantity

BU Billion Units

CCL Central Coalfields Limited

CEA Central Electricity Authority

CERC Central Electricity Regulatory Commission

CIL Coal India Limited

CLP China Light and Power

COD Commercial Date of Operation

DISCOMs Distribution Companies

EDR Economic Demonstrated Resources

FDI Foreign Direct Investment

FSA Fuel Supply Agreement

GCV Gross Calorific Value

IEGC Indian Electricity Grid Code

Kcal/Kg Kilocalorie per Kilogram

MoP Ministry of Power

8

Table of Contents Declaration ................................................................................................................................... i

Executive Summary .................................................................................................................... ii

Acknowledgment ...................................................................................................................... iii

List of Figures ............................................................................................................................ iv

List of Tables .............................................................................................................................. vi

List of Abbreviations ................................................................................................................. vii

Contents………………………………………………………………………………………viii

Chapter -1 “Introduction & Problem Statement”

1.1 Introduction ............................................................................................................................1

1.2 Problem Statement .................................................................................................................2

1.3 Scope of Project……...……………………………………………………………………..3

1.4 Objective of Project…………………………….......………………………………………4

Chapter -2 “Importance of Project & About Organisation”

2.1 Importance of Project……………………………………………………………………….5

2.2 About the Organisation……………………………………………………………………..7

2.3 Technical Aspects w.r.t JPL……………………………………………………………….10

2.4 Indian Power Sector Overview…………………………...……………………………….13

Chapter -3 “Literature Review & Methodology Adopted”

3.1 Literature Survey…………………………………..……………………………………...15

3.2 Methodology Adopted…………………………………………………………………….19

Chapter -4 “FSA & PPA for Supercritical Plant ”

4.1 Concepts in Supercritical Technology…………………………………………………….21

4.2 Competitive Guidelines…………………………………………………………………...23

4.3 Power Purchase Agreement……………………………………………………………….29

4.4 Fuel Supply Agreement………………………………………….……………………......32

9

4.5 FSA Compensation Analysis……………………………………………………………...35

4.6 Coal Cost Analysis & effect on Generation Cost…………………………………………37

Chapter -5 “International Coal Linkages for TPP”

5.1 Introduction………………..……………………………………………………………….48

5.2 Botswana…………………………………………………………………………………...50

5.3 Russia………………….…………………………………………………………………...56

5.4 South Africa……..…….…………………………………………………………………...65

5.5 Mozambique………………..……………………………………………………………...71

5.6 Indonesia…………….…………………………………………...………………………...78

5.7 Australia………………….………………………………………………………………...86

Chapter -6 “Conclusion & Recommendations”

6.1 Conclusion……………….…………………...……………………………………………...93

6.2 Recommendations………….………………………………………………………………...95

6.3 Limitations of Report………………….……………………………………………………..96

6.4 Results & Discussion………………….……………………………………………………..97

6.5 Future Scope of Project…….………………………………………………………………...98

Chapter -7 “Bibliography & References”……………………………………….……………99

Annexure

Annexure -1 ………………………………………………………………………………….104

Annexure- 2……………….…………………………………………………………………105

10

CHAPTER – 1

1.1 INTRODUCTION

Next to Oil & Gas, the conventional resource which is available in this world is Coal but Oil &

Gas is mainly contributing to the automobile sector. Due to the cheaper cost, coal has been

mainly used for steel and for electricity generation. Coking coal ,Non coking coal have been for

steel production and power generation respectively. In India we have more than 250 billion

tonnes reserves [2]

, which stand the fifth largest reserve in the world after USA, Russia, China,

and Australia.

Even though the available reserves are quite sufficient to meet our domestic demand, but the

present scenario has put up in a situation to go for coal procurement from the international

market. With the present consumption scenario, the existing reserves will get exhausted in 100

years. So, we have to take adequate steps to secure our existing reserves.

Although CLP has signed its FSA (Fuel Supply Agreement) with CIL for fulfilling its fuel

supply problem but problems in the domestic coal market is making the power promoters to go

for overseas coal reserves. These problems have led to search for economical and viable options

like Mozambique, Botswana &Russia for coal import to Indian thermal power plants.

On a broader basis, Models like COAL-Mod[9] have been developed to build up international

coal trade for India which has a geographical advantage of having a coastal line with

7517km[3],

thereby easing out the import scenario. The major coal exporters in the world are

Australia, Indonesia, Russia, Colombia, South Africa, USA and China. But the cost associated in

transporting the coal to India is deciding factor to shortlist the main feasible countries from the

options that will be taken up in the report.

[2] SOURCE: World Coal Organisation

[3] SOURCE: Ministry of Road Transport and Highways

11

1.2 PROBLEM STATEMENT

Till now most of the researches that has been done which was primarily focused on coal

sourcing from well known options like Australia, Indonesia, and South Africa. In this project

report, a study of unexplored and viable coal exporting destinations like Mozambique, Botswana

and Russia has been done and thereby giving Indian thermal power plant like JPL, Jhajjar (a

subsidiary of CLP Power Ltd.) a feasible option to fulfill its problem of fuel shortage.

12

1.3 SCOPE OF PROJECT

The project is to find out viable coal resources for importing coal to India. There are number of

countries available for importing coal to India, but all countries are not economically viable for

India. As India has a vast coastal line of 7517 km, so coal transport through sea will be the

cheapest mode of transportation. Coal sourcing countries should also have good port

connectivity. So a survey of all eligible countries like Australia, South Africa, Indonesia,

Mozambique, Botswana, and Russia has been done.

13

1.4 OBJECTIVE OF THE PROJECT

The objective of the project is to find out the best country for importing coal to India. As the

problems in the domestic coal are increasing day by day, so dependency on imported coal by the

Indian thermal power plant is an unavoidable factor. The project will give the detailed feasibility

analysis of importing coal from the major coal exporting countries like Australia, Indonesia,

South Africa, Mozambique, Russia & Botswana.

The project has been carried out after observing the current scenario of coal for various power

plants including JPL. A new thermal power plant needs to have out of box thinking thereby to

survive in this competitive power sector. Thus, a basic research report has been prepared keeping

in view the various pros and cons of the import options to Jhajjar Power Plant.

14

CHAPTER-2

2.1 IMPORTANCE OF PROJECT

Coal reserves have been distributed worldwide. In India we are having a very huge resource of

around 250 billion tonnes. In spite of this huge reserve, still our Indian TPP i.e JPL is starving

for their fuels.

As per CEA, a power plant has to maintain a minimum stock level of 15 days for Pithead based

TPP and for other TPP it varies from 20 to 30 days depends upon their distance from coal mines.

But still out of the 89 operational coal based TPP, twenty seven TPP are running at a critical

stock level of less than 7 days and sixteen TPPs are running at a super critical stock level of less

than 4 days[4]

including JPL plant too..

During the fiscal year 2010-11, the country has lost a generation target by 43.2 BU, the loss of

generation due to shortage of coal is 7 BU, and loss of generation due to poor quality of coal is

7.7BU[5]

. So the problem due to coal contributes around 35% of the gap in generation target.

The main problem in the supply demand gap in the domestic coal is due to

Most of the coal mining areas are announced as No-go[6]

areas by Ministry

of Environment & Forest

Insufficient Rail wagons and Rail infrastructure

Poor Loading/unloading infrastructure

Operational Inefficiencies & coordination issues

Sudden increase in demand

Because of the above reasons the supply demand gap of thermal coal for the fiscal year (2010-

11) was 50 million tonnes. The projected gap for the current year (2011-12) is 84million tonnes

and it will increase to 230 million tonnes by (2017-18).

As per Notification issued by CEA dated 19th April-20115[7]

, all power generating companies,

power project developers, power equipment manufacturers are advised to design the boilers with

[4] SOURCE: CEA: DAILY COAL LEVEL STOCK REPORT

[5] SOURCE: http://www.cea.nic.in/reports/yearly/energygeneration1011.pdf

[6] No-go- It’s an area where coal mining is prohibited due to environmental concern.

[7] SOURCE: http://www.cea.nic.in/reports/articles/thermal/advisoryblendedcoal.pdf

15

blend ratio of 30:70 (or higher) imported/high GCV coal. The station facilities shall also be

designed for handling, unloading and blending of imported/high GCV coal. Although

FSA’s(Fuel Supply Agreement) has come out as a respite for JPL but as per recent notification

CIL will be unable to fulfill the target level of 80% .So, accordingly JPL will have to bear the

shortfall of 25-30 % of its normative availability and thereby leading to dependency on

International coal in order to meet their deficit.

As India is covered by water on three sides, the seaborne trade of coal is the viable option to

meet the supply deficit from the domestic coal, but logistics and port infrastructure facilities are

the main deciding criteria to select the coal exporting country.

The constraints involved are regulations related to coal and the investment in the importing

countries, Infrastructure in the importing country, logistics, supply chain management, and the

price fluctuation in the International market and Indian port infrastructures.

Based on the above criteria the following study will give the detailed analysis of importing

scenario from the country

Indonesia

Australia

South Africa

Mozambique.

Russia

Botswana

Moreover, their comparative analysis with respect to Indian Port scenario will also be done.

16

2.2 ABOUT CLP

The CLP Group and its holding company, CLP Holdings Ltd is a Hong Kong electric

company that has businesses in a number of Asian markets and Australia.

Incorporated in 1901 as China Light & Power Company Syndicate, its core business remains the

generation, transmission, and retailing of electricity.

History of China Light and Power

1901 On 25 January, China Light & Power Company Syndicate was

incorporated in Hong Kong. The maximum demand for electricity in the

year was 1/10MW

1996 CLP expanded into the Asia-Pacific region through a joint venture

investment with the Taiwan Cement Corporation. The two companies

began to construct a coal-fired power station near Hualien, Taiwan.

1997 CLP became involved with the Huaiji hydro power project in Guandong

province in the Chinese Mainland - an important step in the Company's

renewable energy investments.

2002 CLP entered the Indian electricity market through the acquisition of

Gujarat Paguthan Energy Corporation Private Limited (GPEC).

2010 CLP met Climate Vision 2050's carbon intensity target of 0.8kg

2012 CLP India Commissioned Jhajjar Power Limited, 2x 660 MW Coal

Based Supercritical Power Plant at Jhajjar,Haryana

Overseas Markets

In recent years CLP has sought to expand outside of its native Hong Kong accomplishing this

through mergers and acquisitions. Overseas markets it has entered include Australia, India, Laos,

Mainland China, Philippines, Taiwan, and Thailand.

Its first overseas market was Mainland China. By connecting its power stations in Hong Kong to

the Chinese grid CLP began supplying power to that country in 1979.

The 1990s saw the start of expansionary M&A activity, with CLP acquiring nearly a half-dozen

companies between 1996 and 2005.And in 2002 CLP acquired an Indian company, Gujarat

Paguthan Energy Corporation Private Limited.

CLP Operations across the Globe:

17

Figure 1 -CLP Global Presence

Assets and Services of CLP India Group.

Power Generation

Transmission and Distribution System

Retail

Gas Storage

Management Team of CLP Group:

Mr. Rajiv Ranjan Mishra – Managing Director

Mr. Naveen Munjal – Director,Business Development (Conventional)

Mr. Daniel B. Dexter – Director , Technical

Mr.Samir Ashta – Director – Finance & CFO

Brief Description about Operations in India

1. Gujarat Paguthan Energy Corporation (GPEC)

2. Jhajjar Power Limited

3. Renewables

1. Gujarat Paguthan Energy Corporation (GPEC) : is a 655 MW gas-fired combined

cycle power plant at Paguthan, near Bharuch in the state of Gujarat. Apart from its

consistent year-on-year plant performance.

2. Jhajjar Power Limited The Jhajjar Power Plant is a 1,320 MW (2 x 660 MW) domestic

coal based power project located at Village Khanpur, Dist. Jhajjar, Haryana, using

supercritical technology that uses less coal to generate electricity. The plant is scheduled

to be commissioned in late 2011. Eighty-five per cent of it capacity is contracted for

supply to the Haryana DISCOMs (UHBVNL and DHBVNL) and the remaining available

capacity will be sold outside the state of Haryana to Tata Power Trading Corp. Ltd.

18

3. Renewables:

List of CLP India’s Wind Power Projects:

Khandke Wind Farm, Ahmednagar Dist, Maharashtra

Samana Wind Farm (Phases I & II), Jamnagar District., Gujarat

Saundatti Wind Farm, Belgaum Dist, Karnataka

Andhra Lake Wind Farm, Maharashtra

Andhra Lake Wind Farm, Maharashtra

Theni Wind Farm, Theni District, Tamil Nadu

Harapanahalli Wind Farm, Karnataka

Sipla Wind Farm, Rajasthan

Narmada Wind Farm, Andhra Pradesh

19

2.3 ABOUT JHAJJAR POWER PLANT & SOME TECHNICAL ASPECTS

Jhajjar Power Limited or Mahatma Gandhi Thermal Power Plant (A Subsidiary of CLP India

Group) activity is supercritical technology based domestic coal fired 1320 MW power plant and

is located at Matenhail in Jhajjar, Haryana. CLP Power India Private Limited (CLP PIPL), one of

the Indian subsidiaries of CLP Holdings Limited, Hong Kong, was selected through a tariff

based competitive bidding initiated by Haryana Power Generation Corporation Ltd. (HPGCL) on

behalf of distribution utilities in the state of Haryana. The project will supply 90% of the project

capacity, from the Commercial Operation Date (COD) of the project, to the distribution utilities

in Haryana and the balance 10% of the project capacity has to be sold out of the state of the

Haryana.

Location Details:

Table 1-JPL Location Details

Sr.No Paramater Details

1 Location Near Jharli, Wazidpur, Khanpur Khurd and Khanpur

Kalan, Village, Tehsil Matenhail, District Jhajjar,

Haryana

Latitude 28°29’11” N

Longitude 76°21’07” E

2 Nearest Railway Station Jhajjar, on Rewari – Dadri section of Northern

Railway, ~1 km and Distance

3 Nearest Airport Delhi Airport at a distance of about 90 km

Figure 4-JPL Location: SOURCE UNFCC Document

HPGCL had formed a Special Purpose Vehicle (SPV)[8]

called Jhajjar Power Limited (JPL) to

[8] SPV (Special Purpose Vehicle): An Entity formed under Case 2 Bidding which helps in getting all requisite

clearances for a Power Plant.

20

undertake the development of the Project which CLP Group has now taken over by signing

Share Purchase Agreement (SPA) with HPGCL.

Description of parameters involved at JPL:

Jhajjar Power Plant incorporates special environment friendly features as follows:

Supercritical boiler with high boiler efficiency.

Electrostatic precipitator with additional bag filters for controlling fly ash emission

Voluntary installation of Flue Gas Desulphuriser.

Tie-ups with cement manufacturers for fly ash utilization

Fuel source and characteristics

Coal for the station will be transported to Site by a purpose-built rail siding (about 1.5km in

length).The analysis data of coal and ash is as shown:

1） Proximate Analysis (% by weight)

SI.No. Description Design Quality Worst Quality

1 GCV (kcal/kg) 4000 3150

2 Ash 34 46

3 Volatile matter 30 19.27

4 Fixed carbon 21 19.73

5 Moisture 15 15

6 Total 100 100

7 Hardgrove Grindability Index[9]

50 50

Table 2-Coal Quality as per Design for JPL

[9] HGI (High Grindability Index) -determine the relative difficulty of reducing various coals to a particle size

required for efficient combustion in pulverized coal boiler furnaces. (Ministry of Coal)

21

2.4 INDIAN POWER SECTOR SCENARIO

Over the years, the Electricity Industry has made significant progress, Installed capacity

increased from 1,700MW (1950) to 2,02,979.03 MW (02/July/2012)[10]

annual per capita

electrical energy consumption is increased from 16 kWh/annum (1950) to over 778 kWh/annum

(2012). The present growth rate in power generation is tabulated as below :

Figure 2-Electricity Installed Capacity as on 26/08/2012

Total Installed Capacity:

Sector MW %age

State Sector 85,983.63 41.54

Central Sector 65,502.63 31.89

Private Sector 54,969.75 26.55

Total 2,06,464.03

[10] SOURCE: CEA: DAILY GENERATION REPORT

41%

32%

27%

Total Installed Capacity under each Sector

State Sector Central Sector Private Sector

22

Fuel MW %age

Total Thermal 137,386.18 66.32

Coal 117,283.38 56.54

Gas 18,903.05 9.18

Oil 1,199.75 0.59

Hydro (Renewable) 39,291.41 19.24

Nuclear 4,780.00 2.35

RES** (MNRE) 24,998.45 12.07

Total 2,02,979.03 100.00

Source: CEA as on 26.08.2012

Figure 3-Fuel Distribution

67%

19%

2% 12%

Fuel Distribution

Total Thermal

Hydro(Renewable)

Nuclear

RES(MNRE)

23

CHAPTER - 3

3.1 LITERATURE SURVEY

Kolstad et al (1983) stated that a model needs to be developed which will test government

policies in terms of cost and its effect on international coal trade and policies. To review coal

trade markets five basic aspects need to be considered like 1) Geographic concentration of

supply, demand, transportation links (including coal resources, port infrastructure etc) 2)

Concentrations among producers and consumers 3) Barriers to entry 4) Structure of demand and

5) Government policies. With respect to coal quality sulphur content less than 1.5 % is a standard

specification of internationally traded steam coal because such coal meets environment standards

and obviates the needs of flue gas desulphurization. Coal export scenario depend not only new

mining conditions of the region but the development of port as well as rail infrastructure also

plays a vital role in it. South Africa and Russia coal mining scene is quite complicated due to

domestic price control and export licenses. Three major barriers have been cited for new entrants

in new steam coal trade in markets like 1.)Financial resources, 2) technical capability and 3)

market information. There are various kinds of government policies that affect the trade pattern

like formation of economic blocks, export-import quotas and tariffs and subsidies to domestic

production. Many economies resort to cartel formation thereby creating a hindrance in the way

for steam coal trade. In the area of international steam coal trade some of research that needs to

be undertaken is collecting trade data, market conduct, coal production costs, diversity of supply

and demand.

Katrina et al (1991) stated various factors affecting the demand of Australian coal in the pacific

and Atlantic markets. Econometric Models have been proposed to derive the price elasticity of

coal. A 1 % increases of price of Australian coal effects the 0.5-0.8 % demand of coal in Western

as well as South Asian Markets.

Artimev et al (2002) stated an overview of the privatization of the Russian coal industry. It

reviews the salient aspects of the Government’s privatization policy as it evolved over the years,

and looks at the reasons for the successes and the pitfalls encountered along the way. Moreover,

World Bank is in talks with the Russian government to restructure the Russian Coal

infrastructure.

24

Khaulani Fichani et al (2003) stated that Botswana government need to employ a modeling

approach to gain useful policy insights concerning obstacles that discourage the exploitation of

the country’s coal deposits which will ensure to forecast the optimal size of export mine located

on the Mmamabula coalfield in Botswana and the land routes for coal exports for the years 2005

and 2010 .China is becoming the marginal supplier to the world steam coal trade but it does not

pose a threat to Australia’s ranking as the leading steam coal exporter to markets in Asia. In the

Asian market, Australia’s steam coal exports are projected to grow further in response to

growing demand in the region. Coal exports from South Africa and Mmamabula coalfield in

Botswana are exported through Richards Bay (and other possible routes to seaports are Matola in

Mozambique and Walvis Bay in Namibia). Two routes have been selected based on the detailed

geographical analysis: 1) Mmamabula – Lobatse – Ghanzi – Gobabis - Walvis Bay in Namibia,

and 2) Mmamabula –Ellisras – Pretoria – Matola in Maputo, Mozambique. The routes from

export to import ports are assumed to be the same as those for South Africa’s coal exports to

Western Europe and Asia. Botswana Coal Exports will be competitive only if the country has

strong port and rail infrastructure. Moreover, Botswana’s exports are constrained by export port

capacity, which is assumed to be 5.0 MT for Matola in 2005 and 20.0 MT in 2010 for combined

port capacity at Walvis Bay and Matola. In the Asian steam coal markets, South Africa’s forecast

market share is 88% and 77% in 2005 and 2010 respectively and during these years, the

remainder of this market share is taken up by Botswana. Capital costs, rail transportation costs

and their interaction factor are the prime factors for the variability in Botswana’s steam coal

exports. The port of Matola has the advantage of serving both the Asian as well as western

markets.

Aleksandar et al (2009) stated the effect of export and import prices of coal, freight rate on steam

coal trade. The international markets have remained segmented for a long time, in particular

between the Atlantic and Pacific basins, but also with respect to coal qualities, shipping vessel

size, and sectoral demand. A high market concentration on the supplier side (China, the US,

South Africa, Indonesia and Australia together comprise 78% of world steam coal production)

adds to the potential to drive prices away from competitive levels. Today, there is no worldwide

price index for this steam coal. International steam coal prices depend very strongly on logistics

costs, such as railway or domestic shipping ,sea transport and transportation to the final customer

.Several hypothesis have been developed to study the steam coal markets along with its usability

with logistics.

25

Haftendorn et al (2010) stated that a tool to analyze the future developments of the international

steam coal market, the “COALMOD-World” model. Global steam trade is increasing at a faster

pace with more and more countries relying on imported coal option. There is a value added chain

of steam coal trade involving producers, transport infrastructure, export ports and traders. The

energy content of steam coal sold on the international market varies according to the producer.

The differences in coal qualities on the international market are not as large as with the coal

types that are produced and sold domestically but there are still some significant variations.

Various problems have been cited like producers problem, exporters problem etc. The cost of a

ton of exported coal includes production costs, landed transport costs and the export fee.

Australia and Indonesia remain key players in the Pacific market. Low production costs, flexible

and low cost investments are the main reasons for this development. The third most important

exporter is South Africa with an export level that doubles from 2006 till 2030. This is due to an

increase in import demand in Asia and especially in India that opens new markets for the good

quality South African coal. Globally, prices show an upward trend over the time period 2006 to

2030. The lowest prices with the lowest increase over time are the domestic prices in South

Africa, the U.S. and Russia.

Johannes et al (2011) stated the trends of coal pricing that affect international steam coal trade

from 2006 to 2008 leading to demand supply mismatch in the Asian Markets. Majority of steam

coals are not traded internationally but are produced and consumed in domestic markets. About

13% of the global steam coal production is traded internationally and more than 90% of

international steam coal trade is seaborne. South Africa, Colombia, Australia and Indonesia hold

most of the supply capacity as these countries has good quality coal reserves whereas other

countries like China, USA and Russia have some dedicated export collieries .The seaborne trade

market can be divided into a Pacific and an Atlantic market region. Most of the Pacific market

has grown from emerging import regions like Indian, China & South East Asia. Model has been

designed in which various key exporting regions (New South Wales, Columbia, Kuzbass etc)

and demand regions like India, China; South East Asia has been studied. Mining costs, average

inland transport costs and port terminal costs add up to a quadratic FOB (free-on-board).

Generally, coal supply costs increased world-wide during 2006 and 2008 due to input price

escalation. Steam coal export capacity has increased by about 12% between 2006 to 2008 with

Indonesia and Australia as major players. Inland transport costs depend on the transportation

26

mode and the distance from the coal fields to the export terminal. Country specific Inland and

transportation costs of coal have been added to the FOB price. Various authors have found that

price elasticity of steam coal is inelastic (|Elasticity| < 1) and majority of internationally traded

coal is produced by only four countries with a primarily export-oriented mining industry and a

favorable cost situation like Indonesia, Australia, South Africa and Colombia in the real market.

27

3.2 METHODOLGY CHOSEN (SOURCE –COAL-Mod Model by Haftendorn) [9]

COAL Mod Model is a most prominent model that is being referred for coal sourcing from

various countries. Some of the key aspects about the COAL Mod model are as described below:

Need to Find Optimal Coal Import Location: Indian Thermal plant needs to find the

prospective locations for coal sourcing to India. There are a number of countries like

Australia, South Africa, Indonesia, Columbia, Russia etc.

Coal Reserves in world: An analysis will be done about the various coal reserves that can

be deployed by Indian thermal power plants companies like CLP.

Regulations & Coal Export Scenario: Regulatory framework is studied in each of the

country that will be chosen for coal sourcing to India. Moreover, coal export scenario

during the past years are also given due importance.

Viable Countries for Coal Sourcing: Australia, Mozambique, Indonesia, Russia and

Botswana seems to be viable options for sourcing of coal for India based on the various

deciding factors like regulatory aspects, price of coal etc.

28

Port &Railway Infrastructure: Ports and railways infrastructure plays a very crucial role

in ceding out the most viable options in order to import coal from various countries.

Number of days in transit taken by the cargo ship is also calculated in order to get the

more accurate picture.

Conclusion: Finally conclusion is calculated after studying various underlying prospects

associated with the coal sourcing for Indian thermal power plants like India.

29

CHAPTER - 4

4.1 SUPERCRITICAL TECHNOLOGY

India has a considerable potential for adding up new power generation capacity based on coal,

having proven reserves of over 202 billion tones. According to Integrated Energy Policy, coal

will remain the predominant source of energy for power generation for next two decades. Coal is

the most abundant fuel available in India. It relatively inexpensive compared to other fuels and

can also be imported economically.

NEED TO ADOPT CLEAN COAL TECHNOLOGY

Utilize Indian coal efficiently – enhance energy security

Lower emissions of CO2 – mitigate climate change

Reduce emissions of NOx, SOx, and particulates

Improve the environment

Reduce the additional generation capacity required

Optimise the use of national resources

SC & USC PARAMETERS

TYPE TEMPERATURE PRESSURE

Super critical parameters ≥ 374°C

≥ 221.4 bar

Ultra Super critical parameters ≥ 600°C

≥ 275 bar

USC/SC TECHNOLOGY WORLD WIDE

Several USC, PC plants of 400-1000 MW have entered service in Japan and Europe over

the past five years with design heat rates 5 to 7 percent lower than standard sub-critical

plants. The longer-term reliability of these USC plants in Europe and Japan is of key

importance to the future of this technology.

AFBC plants are particularly suitable for lower quality and high ash coals. In the smaller

sizes 50-150 MW they have shown reliabilities similar to PC plants of the same size.

What is Supercritical? The term "supercritical" refers to main steam operating conditions, being

above the critical pressure of water (221.5 bar). The significance of the critical point is the

30

difference in the density between steam and water. Above the critical pressure there is no

distinction between steam and water. i.e., above 221.5 bar, water is fluid.

Figure 4-Rankine Cycle for Super Critical Tech.

The figure above shows the Supercritical steam

cycle with one reheat. Where,a-b

Condensate cycle up to Deaerator

c Boiler feed pump discharge

c-d Main steam generation

e-f Expansion in turbine

f-g Reheat steam generation

g-h Expansion in turbine

Table 3-Description of Regions in Rankine Cycle

In the area under the dome, liquid and steam coexist in equilibrium. The critical point is at the

top of the dome. Liquid water is to the left of the dome. Steam is to the right of the dome.

Enhancements:

Plant efficiency 0.69% to 1.64%

Fuel tolerance More tolerant to coal quality changes

Reductions:

Coal Consumption

Ash production

CO2

SO2

1.79% to 4.24%

31

NOx

Advantages of Super Critical Technology

Some of the benefits of advanced supercritical power plants include:

(a) Reduced fuel costs due to improved plant efficiency with better PLF [11]

;

(b) Significant improvement of environment by reduction in CO2 emissions;

(c) Plant costs comparable with sub-critical technology and less than other clean coal

technologies;

(d) Much reduced NOx, SOx and particulate emissions;

(e) Can be fully integrated with appropriate CO2 capture technology.

4.2 COMPETITIVE BIDDING GUIDELINES/ROUTES

Government has devised the Bidding routes in order to maintain the competition in the market.

Guidelines has been laid down in the Sec 63 of Electricity Act 2003.Apart from arousing

competition there are some further purposes of the same like:

Promote competitive procurement of electricity by distribution licensees;

Facilitate transparency and fairness in procurement processes;

Facilitate reduction of information asymmetries for various bidders;

Protect consumer interests by facilitating competitive conditions & standardization in

procurement of electricity;

Provide flexibility to suppliers on internal operations while ensuring certainty on

availability of power and tariffs for buyers.

There can be two routes for bidding:

1. Case 1 Bidding

2. Case 2 Bidding

Case 1 Bidding:

As per the National Electricity Policy 2006 the government of India has issued the guidelines for

Competitive bidding of power projects. Historically Indian power projects had been developed

through the cost plus basis and mostly by govt. owned utilities.

[11] PLF: Plant Load Factor-is a measure of the output of a power plant compared to the maximum output it could

produce.

32

Case 1 is an open bid where the developer / entrepreneur has to decide for fuel and location and

Compete against any other developers in general. The project developer can bid on the basis of:

Any fuel

Any Location

Any technology

The project developer bids for the portion or the total power generated. The bidder is responsible

for Clearances/ approvals etc. This kind of bidding is more relevant for states with limited fuel

sources. Such bidding entails higher risk for developer and lower risk for the state.

Case 2 Bidding(As per Competitive Guidelines issued by MoP):

In Case 2 bids the developer is expected to bid on the basis of:

Site identification and land acquisition required for the project

• Environmental clearance

• Fuel linkage, if required (may also be asked from bidder)

• Water linkage

• Requisite Hydrological, geological, meteorological and seismological data necessary for

preparation of Detailed Project Report (DPR), where applicable

The government (state or Central) offers to assist private developers to set up large power plants

in Securing land, water and mandatory clearances; signing of power purchase agreement;

Establishment of fuel linkages, etc. Thus, the government is but a facilitator with the private

Promoters owning the responsibility of development. Many state governments have gone in for

such Case-2 bidding. Case 2 bidding can be called by one or more states by the formation of

SPV (Special Purpose Vehicle). Such kind of bidding is more applicable for states where fuel

sources are available or coastal areas exist (for imported fuel).

One of two elements in a two-part pricing method used in capacity transactions (the other

element is the energy charge) is the capacity charge. The capacity charge, sometimes called the

demand charge, is assessed on the capacity (amount of electric power) being purchased. In the

Indian context Capacity charge is paid based on actual availability in KWh, as per charges

quoted in Rs/KWh and shall be limited to the normative availability[12]

(or normative capacity

index for hydro electric stations). The normative availability can be higher by a maximum of 5%

33

of the level specified in the tariff regulations of the Central Electricity Regulatory Commission

(CERC) prevailing at the time of the bid process, and shall be computed on annual basis.

The seller (successful bidder) shall declare availability on a daily basis in accordance with the

scheduling procedure as stipulated in the Indian Electricity Grid Code (IEGC) from time to time.

Tariff Structure:

Capacity Charges

Energy Charges

Combined Capacity & Energy Charges. For setting the Tariff Structure, the procurer shall

invite bids on the basis of capacity charge and net quoted heat rate. The net heat rate shall

be ex-bus taking into account internal power consumption of the power station. The

Capacity Charges:

Capacity charge shall be paid based on actual availability in KWh, as per charges quoted in

Rs/KWh and shall be limited to the normative availability (or normative capacity index for hydro

electric stations). Escalable as well as Non Escalable charges are accounted for calculating the

capacity charges as far as tariff structure is concerned. In such case a penalty at the rate of 20%

of the capacity charge shall be applicable to the extent of the shortfall in availability. Ratio of

minimum and maximum capacity charge for any year shall not be less than 0.7 to avoid

excessive front loading or back loading during the period of contract.

Adequate payment security cab provided to the bidders. The payment security may constitute

two components:

Letter of Credit[13]

Letter of Credit backed by credible escrow mechanism.

Bidding Process:

Standard Bidding process needs to be followed by the bidders in order to approach the seller of

power. As in case 2 Bidding, Government approaches the sellers in order to make Special

Purpose Vehicle, A standard Process need to be adopted and the List of steps that need to be

followed can be summarized as under:

[12] CERC: Normative Plant Availability Factor (NAPAF)

[13] Letter of Credit: A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time

and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be

required to cover the full or remaining amount of the purchase.

34

Figure 5-Bidding Mechanism

Case 1 and Case 2 Bidding:

Contract Award: The PPA shall be signed with the selected bidder consequent to the selection

process in accordance with the terms and conditions as finalized in the bid document before the

RFP stage.

Some of the Case 1 and Case 2 Bidding Projects are as under:

Case 1 Bidding

•Location/ technology/ fuel –not specified.

•Generally done by the individual state.

•Power developer bids for the portion or the total power generated.

•Bidder responsible for clearances/ approvals etc.

•More relevant for states with limited fuel sources.

•Higher risk for developer.

•Lower risk for state

Case 2 Bidding

•Land/ fuel – provided by procurer.

•Can be done by one or more states by the formation of SPV.

•The whole power is procured produced from the power plant.

•States responsible for facilitating all the clearances.

•More applicable for states where fuel sources are available or costal areas exist.

•Higher risk for State.

•Lower risk for developer

35

Sl. No. State Type Seller/Project

Name Procurer

Capacity

(MW) Fuel Type

1 Assam Case-II

Bordikarai Small

Hydro Electric Project

Assam Power

Distribution Company. 4.7 MW

Hydro

Electric

Project Municipal Solid

Waste Based Power

Project

Assam Power

Distribution Company

Ltd.

6 MW Municipal

Solid

Waste

2 Chhattisgarh Case-II Indiabulls CSEB

Bhaiyathan

Power Ltd.

Chhattisgarh State

Electricity

Board

858 MW Coal

3 Delhi

Case-II Sasan Power Ltd.

(UMPP) BSES Rajdhani Power

Ltd.

196.11 MW Coal

Case-II Tiliya Power Ltd. (Tiliya

UMPP)

64 MW Coal

Case-II Sasan Power Ltd.

(UMPP) BSES Yamuna Power

Ltd.

122.58 MW Coal

Case-II Tiliya Power Ltd. (Tiliya

UMPP)

44 MW Coal

4 Gujarat Case-I

Adani Enterprises Ltd. Gujarat Urja Vikas

Nigam Ltd.

1000 MW Coal /

Lignite

Aryan Coal

Benefaciaries Pvt. Ltd.

Gujarat Urja Vikas

Nigam Ltd. 200 MW

Unspecified

Adani Power Pvt. Ltd. Gujarat Urja Vikas

Nigam Ltd.

1000 MW

Essar Power Ltd. Gujarat Urja Vikas

Nigam Ltd. 1000 MW Imported

Coal

5 Haryana

Case-I

Mundra TPS, Phase-

IV, Gujarat (for Adani

Power td.)

Haryana Power Purchase

Centre 1424 MW Coal

Kamalang Thermal

Power Project, Orissa

(for PTC India Ltd. -

GMR Project)

Haryana Power Purchase

Centre 300 MW Coal

Case-II Mahatma Gandhi Super

Thermal Power

Plant,(CLP)Jhajjar

Haryana Power Purchase

Centre 1320MW Coal

6 Madhya

Pradesh Case-II

Sasan UMPP MP Power Trading

Comp 1500 MW

Coal

(Thermal)

Jharkhand Integrated

Power Ltd. Tilaiya

(UMPP) Jharkhand

MP Power Trading

Comp 200 MW

Coal

(Thermal)

7 Punjab Case-II Talwandi Sabo Power

Limited Erstwhile PSEB

1800 MW +

10% Coal

Table 4-Projects under Case 1 & Case 2 Bidding SOURCE; CEA

36

4.3 POWER PURCHASE AGREEMENT (PPA)

A Power Purchase Agreement (PPA) is a legal contract between an electricity generator

(provider) and a power purchaser (host). The power purchaser purchases energy, and sometimes

also capacity and/or ancillary services, from the electricity generator.

The PPA is often regarded as the central document in the development of independent electricity

generating assets (power plants), and is a key to obtaining project financing for the project.

Contents of Power Purchase Agreement with its brief

1. Definitions and interpretation

2. Term of agreement

PPA was signed between below mentioned parties on 7th

,August,2008

Uttar Haryana Bijli Vitran Nigam Limited(Lead Procurer)

Dakshin Haryana Bijli Vitran Nigam Limted.(Alternate Lead Procurer)

Jhajjar Power Limited.

3. Conditions subsequent to be satisfied by the seller and the procurer

Procurers have to ensure various clearances are cleared within 3 months from the

date of issue of Letter of Intent[14]

.

Performance Guarantee will be valid till 3 months from the scheduled date of

COD (Commercial date of operation).

4. Development of the project

Seller has the obligations of development of project and provides timely

information about the power station specifications. Procurer has the obligation to

provide the Interconnection and Transmission Facilities to enable the Power

Station to be connected to the Grid System not later than the Scheduled

Connection Date.

Liquidated Damages: If any unit is not commissioned by its scheduled date of

operation then sum total of liabilities has to be payable by seller to the procurers

5. Construction:

Seller has the various responsibilities like site development, quality of workman

ship, consents required for the power plant, construction documents &

[14] Letter of Intent: An agreement that describes in detail a corporation's intention to execute a corporate action.

37

coordination of construction activities.

6. Synchronisation, commissioning and commercial operation

Seller shall give at least 60 days advance preliminary notice and atleast 30 days

final written notice on the date it wishes to synchronise it to Grid.

Commissioning test will be conducted in all ambient conditions and the unit will

be operated for 72 hours above ninety five (95) percent of its Contracted Capacity.

7. Capacity, availability and dispatch.

Incentive will be provided if the availability is more than 85 % than the normative

availability at the rate of 25 paise/KWh.

In case the Availability for a Contract Year is less than 75%, the Seller shall pay a

penalty at the rate of twenty percent (20%) of the simple average Capacity Charge

(in Rs./kWh) for all Months in the Contract Year applied on the energy (in kwh)

corresponding to the difference between 75% and Availability during such

Contract Year

8. Billing and payment

All tariff payments which are to made by the procurer needs to submitted in the

seller’s bank account as designated by the procurer and that too needs to be

notified by the seller before 90 days from the date of COD.

Late Payment Surcharge: In the event of delay of payment ay any procurer beyond

its due date, a late payment surcharge by such procurer to the seller at the rate of

two(2) percent in excess of applicable SBAR(State Bank Advance Rate like SBI

PLR)[15]

on the amount of outstanding payment.

Rebate: Provisional Bill will be raised by the Seller on the last working day of the

Month where the Capacity Charges shall be based on the Declared Capacity for

the full Month and the Energy Charge shall be based on the final implemented

Scheduled Energy up to 25th

day of the Month. Two percent (2%) rebate for credit

to Sellers account made within one (1) Business Day of the presentation of

Monthly Bill for the Month for which the Provisional Bill was raised earlier.

Payment Mechanism:

Each procurer has to issue Irrevocable Letter of Credit (IRLC) [16]

and the

same letter has to issue by the bank which is the default bank escrow agent.

[15] BPLR (State Bank Advance Rate) revised upwards by 50 bps from 14.25% p.a. to 14.75% p.a. w.e.f

13.08.2011. (State Bank of India)

[16] IRLC: A letter of Credit that can’t be cancelled.

38

Each letter of credit is to be renewed annually with an amount equals to 1.1 times

the estimated average monthly bill based on normative ability.

9. Force majeure

Force Majeure is an unavoidable event/circumstance which can affect the plant’s

performance.

Natural Force Majeure events: Lightning, drought, fire and explosion,

earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado, or

exceptionally adverse weather conditions, on-completion of the Rail corridor for

transportation of coal from CIL’s/CIL subsidiary’s linked coal mines to the

Project site.

Non-Natural Force Majeure Events :

Direct Non Natural Force Majeure Events: Any lawful consent required by seller to

perform their obligations under project department.

Indirect Non - Natural Force Majeure Events : any act of war (whether declared or

undeclared), invasion, armed conflict or act of foreign enemy, blockade, embargo

10. Events of default and termination

Various cases of Default have been listed in the agreement like if average

availability of plant getting less than 65 %.

Solvency conditions with respect to the seller and leading to further damages.

Seller fails to pay more than 15 % of the most recent monthly bill.

Advantages of Power Purchase Agreement:

PPA Helps in engaging the Private participation in the Private projects and thereby

helping to increase the progress of the Power projects and thereby helping to increase the

health of Indian Power sector.

PPA helps in securing the supply of fuel to the generating stations and thereby helping to

maintain the healthiness of the Indian power sector.

PPA help in protecting the generating companies form cheap and low quality coal that

may affect the efficiency as well as performance of the generating companies

PPA may help in stabilizing the overall health of the power sector.

Disadvantages of Power Purchase Agreement

PPA will not be good for the small projects as there is uncertainty for the demand side

esp. for the small scale consumers of coal or fuel.

39

With regard to the changing conditions in the environmental scenario, Power Sellers may

have to suffer a loss.

4.4 FUEL SUPPLY AGREEMENT

FSA stands for Fuel supply Agreement. As per New Coal Distribution Policy (NCDP) [17]

Coal supplies are governed by legally enforceable agreements between the seller (coal

companies) and the consumer under specific terms and conditions.

As far as Jhajjar Power Limited (CLP India Group Company) is concerned, it signed its

FSA with Central Coalfields Limited i.e. CCL.

Contents of Fuel Supply Agreement

1. Interpretation rules and defined terms

2. Period of agreement

3. Security Deposit

4. Quantity

5. Compensation for short delivery and lifting

6. Level of delivery

7. Level of Lifting

8. Deemed delivered quantity

9. Performance incentive

10. Quality of Coal

11. Declaration of Common Grade/Re-declaration of Grade by seller

12. Assessment of Coal at loading end

13. Weighment of Coal.

14. Operation and Maintenance of Weighment system

15. Method of Order Booking and delivery of coal

16. Transfer of Title to goods.

17. Price of Coal.

18. Compensation

19. Overloading and under loading.

20. Modalities for billing, claims and payments.

21. Interest of delayed payment

22. Suspension of coal supplies

23. Settlement of Disputes

24. Termination Of contract/Agreement

[17]: Ministry of Coal: http://coal.gov.in/policy181007.pdf

40

25. Force Majeure.

26. Schedule and Annexure

27. Savings

28. Bank Guarantee Format

Fuel Supply Agreement Aspects w.r.t JPL

Period of Agreement:

FSA was signed between JPL and CCL, Central Coalfields Limited

(Subsidiary of CIL Ltd.) on 7th

June, 2012.

The Agreement has been signed for a period of 20 years and after completion

of 5 years, either party can approach for review of the agreement.

Security Deposit: The purchaser is required to submit a security deposit equivalent to 6 % of the

basic price of grade of coal that is taken into consideration while signing the agreement.

Quantity:

The Annual Contracted Quantity of coal to be supplied will be 52.1 lakhs per

tonne from the seller mines.

Monthly scheduled quantity will be 1/3rd

of the quarterly quantity.

Coal Quantity greater than 80% but less than 100 % has to be supplied by the

supplier to the purchased. Failing to provide the aforesaid quantity will

acquire a compensation of 0.01 % of the failed quantity of the coal.

Quality:

Seller should make adequate facilities not to supply coal less than

2200Kcal/Kg (GCV).In case seller supplies such quantity of coal, purchaser

should limit price of coal to Re 1/tonne.

E Grade coal is to be supplied to JPL with GCV Values ranging from 4300-

4600,4600-4900,4900-5200

Method of Order Booking:

Purchaser should submit the order for the next month at least 7 days prior to

the commencement of next month either by road or by rail.

Modalities for Billing, Payments, Claims:

The purchaser shall make advance payment for a month in 3 installments

separated by 10 days stating from day 1 of the month.

41

A purchaser should issue irrevocable letter of credit to the seller.

Adjustments for Coal Quality/Grade: Analysis of Coal Quality should be supported with relevant

documents related to

a. Total Moisture (%)

b. Equilibrated Moisture (%)

c. Ash (%)

d. GCV (Kcal/Kg)

Force Majeure Conditions & Termination of Agreement

In case of Force Majeure conditions, affected party has a time limit of giving

90 days prior to the termination of the agreement.

In case there is any change in the material, then purchaser has the power to

terminate the agreement within 30 days.

Benefits to CIL Benefits to Customer(CLP)

1. Assured market for the coal due to loyal

customers.

1. Assured supply of Contracted quantity of

coal uniformly as per agreed dispatch

schedules enforced by bonuses and penalties.

2. Better Planning and Monitoring of Quality,

Production and Dispatches due to the prior

knowledge of quality and quantity of coal to be

supplied.

2. Supply of committed grade of coal enforced

by bonuses and penalties.

3. Scope for maximizing sales revenue by

earning bonuses due to better performance

3. Customer can avoid the repetitive processes,

delays and costs involved in procurement of

coal.

4.5 FSA COMPENSATION ANALYSIS

Compensation Analysis of FSA has been done w.r.t JPL according to the formula that has been

mentioned in the FSA model:

FSA Compensation Analysis:

S.No. Level of

Delivery /

Lifting of

Coal in a

Year

Rate of compensation

for the Failed

Quantity (at the rate

of simple average of

Base Prices of

Grades, as shown in

Schedule III)

Formula for calculation of compensation

1 Less than

100% but up to

80%

NIL

42

2 Less than 80% 0.01%# 0.0001 x P x ((80-LD or LL)/100) x ACQ

# to be operative after a period of three years from the date of signing of the FSA

Level of Delivery:

Level of Delivery with respect to a Year shall be calculated in the form of Percentage as per the

following formula:

Level of Delivery (LD) = (DQ+DDQ+FM+RF)/ACQ * 100

LD = Level of Delivery of Coal by the Seller during the Year.

DQ = Delivered Quantity, namely, aggregate actual quantities of Coal delivered by the Seller

during the Year

FM = Force Majeure; Proportionate quantity of Coal which could not be delivered by the Seller

in a Year due to occurrence of Force Majeure event affecting the Seller and / or the Purchaser,

calculated as under:

FM = (ACQ x Number of days lost under applicable Force Majeure event)/365

RF = Quantity of Coal that could not be supplied by the Seller during the Year owing to the

Railways not allotting wagons or not placing wagons for loading, in spite of specific valid

indent/offer submitted by the Seller to the Railways against valid program(s) submitted by the

Purchaser for the purpose.

Deemed Delivery Quantity:

The quantity of Coal not supplied by the Seller owing to omission or failure on the part of

Purchaser to submit in advance the designated rail programme (s) to the Seller as per agreed

time-table with respect to the Scheduled Quantity/cancellation of the rail programme.

4.6 COAL COST ANALYSIS & EFFECT ON GENERATION COST

Coal & CIL

COAL is the most important and abundant fossil fuel in India. It accounts for 55% of the

country's energy need.[17] The country's industrial heritage was built upon indigenous coal.

43

With hard coal reserves around 246 billion tonnes, of which 92 billion tonnes are proven, Indian

coal offers a unique ecofriendly fuel source to domestic energy market for the next century and

beyond. Under the provisions of the Coal Mines (Nationalization) Act 1973, only public sector

companies can mine coal. The coal industry was reorganized into two major public sector

companies, namely Coal India Limited (CIL) which owns and manages all the old Government-

owned mines of National Coal Development Corporation (NCDC) and the nationalized private

mines and Singreni Colliery Company Limited (SCCL) which was in existence under the

ownership and management of Andhra Pradesh State Government at the time of the

nationalization

Figure 6-CIL & its Subsidiaries (Coal India Limited-www.coalindia.in)

Coal Reserves and Resources of CIL [18]

As of April 1, 2010, we had total coal resources of 64,786 million tons, comprising, pursuant of

ISP classifications, Proved Geological Reserves of 52,546 million tons, Indicated Geological

Reserves of 10,298 million tons and Inferred Geological Reserves of 1,942 million tons.

44

Coal Production

Grades Fiscal

2008 2009 2010 2011 2012

Raw

coal

produc

tion

Mill

Te

% of

Raw

coal

prod

ucti

on

Raw

coal

produ

ction

Mill

Te

% of

Raw

coal

produ

ction

Raw

coal

produ

ction

Mill

Te

% of

Raw

coal

produ

ction

Raw

coal

produ

ction

Mill

Te

% of

Raw

coal

produ

ction

Raw

coal

produ

ction

Mill

Te

% of

Raw

coal

producti

on

Non

Coking

Coal

353.30 93.1 377.1

9 93.4

395.1

3 91.6

389.9

7 90.4

392.4

8 90.1

Coking

Coal 2 26.16 6.9 26.54 6.6 36.13 8.4 41.35 9.6 43.36 9.9

Total 379.46 100.

0

403.7

3 100.0

431.2

6 100.0

431.3

2 100.0

435.8

4 100.0

Coal Grades:

The gradation of non-coking coal is based on Useful Heat Value (UHV)[ useful heat value of

coal. which is calculated as UHV = 8900-138(ash%+Moisture%) in Kcal/kg] the gradation of

coking coal is based on ash content and for semi coking / weakly coking coal it is based on ash

plus moisture content , as in vogue as per notification.

DETAILS UNIT ECL BCCL CCL NCL WCL SECL MCL NEC CIL

PRODUCTION

UG*

OC#

Mill Te

Mill Te

6.83

23.73

3.48

26.73

1.09

46.91

0.00

66.40

8.39

34.72

16.41

97.43

2.19

100.93

0.004

0.60

38.39

397.45

TOTAL Mill

Te 30.56 30.21 48.00 66.40 43.11 113.84 103.12 0.60 435.84

OB MCUM 60.31 81.36 65.68 201.66 122.49 113.49 85.67 4.48 735.14

OFFTAKE Mill

Te 30.83 30.16 48.04 63.60 41.97 115.15 102.53 0.80 433.08

45

Grades of Non-coking Coal

Grade Useful Heat Value

(UHV) (Kcal/Kg

Corresponding

Ash% + Moisture%

Gross Calorific Value GCV

(Kcal/ Kg)

A Exceeding 6200 Not exceeding 19.5 Exceeding 6454

B Exceeding 5600 but

not exceeding 6200

19.6 to 23.8 Exceeding 6049 but not

exceeding 6454

C Exceeding 4940 but

not exceeding 5600

23.9 to 28.6 Exceeding 5597 but not

exceeding. 6049

D Exceeding 4200 but

not exceeding 4940

28.7 to 34.0 Exceeding 5089 but not

Exceeding 5597

E Exceeding 3360 but

not exceeding 4200

34.1 to 40.0 Exceeding 4324 but not

exceeding 5089

F Exceeding 2400 but

not exceeding 3360

40.1 to 47.0 Exceeding 3865 but not

exceeding. 4324

G Exceeding 1300 but

not exceeding 2400

47.1 to 55.0 Exceeding 3113 but not

exceeding 3865

Table 5-Grades of Non Coking Coal(Ministry of Coal)

New Grading acc to GCV:

UHV

GRADE

GCV

GRADES

Gross Calorific Value per Kilo

Calories

PRICE OF ROM

COAL

(in Rs/T)

A

G1 Above 7000 3897

G2 6701 to 7000 3733

G3 6401 to 6700 3569

B G4 6101 to 6400 3336

G5 5801 to 6100 3319

C G6 5501 to 5800 2360

G7 5201 to 5500 1840

D G8 4901 to 5200 1700

G9 4601 to 4900 1500

E G10 4301 to 4600 1400

G11 4001 to 4300 1130

F G12 3701 to 4000 910

G13 3401 to 3700 690

G G14 3101 to 3400 610

G15 2801 to 3100 510

UNGRADE G16 2501 to 2800 474

G17 2201 to 2500 420

46

Table 6-Coal Classification acc. to GCV

Acquiring of Coal for CLP( Jhajjar Power Limited)

JPL can acquire the coal through one of the following options:

Acquiring of coal through its FSA (Fuel Supply Agreement) with CIL i.e CCL.

Acquiring of coal by importing from Indonesia and Australia

Acquiring of coal through open markets or E-Auction.

Figure 8-Coal Fulfillment options for CLP

Coal Acquiring through FSA:

JPL has already signed FSA with CIL for fulfillment of its coal requirement for its both units of

2 x 660MW i.e. 5.21 MT. The Linkages of coal demand is primarily done with the objective of

planning of coal supplies, keeping in view indigenous coal resources as well as the need to

supply fuel of appropriate quality to the consumers and at the same time making the most

economic use of the available capacity for production and of coal.

Areas covered under CCL:

CCL was formed in 1975 with 63 mines grouped in 11 Areas[18]

(26 underground and 37 open

cast with 7 washeries (4 Medium coking coal and 3 non-coking coal) The Company has six

operating coalfields and one Central Workshop (ISO9002 certified) and 5 Regional Workshops,

3 of them ISO9002 certified.

47

Figure 9-CCL Mine Areas

Annual Production of CCL for the FY 2009-10 = 47.063 MT

Annual Production of CCL for the FY 2010-11 = 47.520 MT [19]

Out of which for the year 2010-11, CCL transported a total of 29.88MT to Power Plants.

Acquiring of Coal through Imported route:

There are various options in order to fulfill its coal supply from imported countries routes.

Details of countries having coal reserves are as follows: Australia, Indonesia, Russia,

Mozambique, Botswana, USA, and Columbia, Canada

A broader analysis of the Coal with its GCV Value along with its various components can be

discussed as below:

Acquiring Coal from Open Markets:

As described above, CLP has broadly 4 major options to fulfill its coal requirement of 5.21MT

for both units but as per past analysis and latest press releases of CIL,it will not be able to

provide coal more than 50-55 % of the aforesaid quantity. Continuing on those options of

fulfillment of coal, CLP has the option to acquire the shortfall of coal from the open market too.

Open market is the option in which some private players are holding the stock and they provide

the coal to the needy industries. No doubt the price they offer is almost double the price as in

[18], [19] – SOURCE: Central Coalfields Annual Report 2009-10 & 2010-11

48

case of coal from the same linkage area.

Acquiring Coal from E-Auction: E-Auction of Coal may be defined as the buying of Coal from

the collieries which comes under the surveillance of CIL.CIL Launched a new E auction scheme

on 18.10.2007 called E-Auction Scheme 2007[20]

. 10% of annual production of CIL is marked

for e-auction. In India,two organizations have the prime responsibility for carrying out the E-

Auctioning of Coal like

1. MSTC India

2. Coal Junction

1.)MSTC India: MSTC Stands for Metal Scrap Trade Corporation Limited. It is a Mini Ratna

Category-I PSU under the administrative control of the Ministry of Steel, Government of India.

As on date,MSTC has two major portfolios of business. Its e-auction portals

namely,www.mstcecommerce.com/auctionhome/ and www.mstcecommerce.com have become

popular tools for transacting business over the internet in a transparent manner

2.) Coal Junction: coal junction is m-junction's coal sales division which enables the entire coal

buying community in India to buy coal through the Internet. Coal-junction conducts e-Sales on

behalf of Coal India Limited (CIL) and its subsidiaries.

Kinds of E-Auction:

1. Forward E –Auction

2. Spot E-Auction.

Forward E –Auction:

Objective: Coal distribution through forward e-Auction is aimed to provide access to

coal for such coal consumers who wish to have an assured supply over a long period, say

one year, through e-auction mode so as to plan their operation etc.

Earnest Money Deposit:

All interested registered consumers shall be required to deposit in advance non- interest

bearing EMD with respective service provider for such an amount as would cover 10% of

the reserve price (of a forward e-Auction concerned) in terms of basic price of coal

exclusive of taxes, duties and other charges as

[20] SOURCE: Coal India Ltd http://www.coalindia.in/Documents/e-Auction/FORWARD_9_Apr_09.pdf

49

If the buyer fails to deposit the coal value for at least 50% of the monthly scheduled

quantity then such deposit shall not be accepted.

Spot Auction: Spot Auction is also another type of coal auctioning started by CIL in accordance

with the Forward Auction. As forward auction is conducted quarterly, there is not any restriction

as far as Spot E auction is concerned. Moreover in case of Spot E auction, The Bidder shall offer

his Bid price (per tonne) in the increment of Rs.10/- (Rupees ten) during the Normal e-Auction

period. During the extended period of first two (2) hours, the Bidder shall offer his Bid price in

the increment of Rs.20/-. Beyond this extended period of two hours the bid price increment

would be Rs. 50/- (Rs.Fifty) only.

Benefits of E Auction:

The benefits are briefly stated as under

Total transparency in coal marketing.

Equal treatment to all the categories of customers without any discrimination.

Buyers getting coal of their choice in respect of source, grade, size/mode.

Buyers can purchase coal from anywhere in the country.

New consumers, snapped consumers and consumers seeking additional coal over &

above their FSA quantity could buy coal under this scheme.

Tendency of diverting coal to secondary market at a premium is greatly reduced, if not

fully eliminated.

No quota/linkage/sponsorship needed for purchase of coal.

Option for depositing money for registration/EMD on-line.

50

Figure10: SOURCE –Ministry of Coal-EAuction of Coal by CIL

Analysis of Coal Mix on the Per Unit Fuel Cost:

As per FSA, CIL is deemed to supply 80% of the coal to CLP India group but due to various

complications arising out of this, CIL will not be able to supply more than 50-55% of the coal as

per the recent notification released by CIL. Owing to this various cases have been taken for

fulfilling the shortfall requirement.

Methodology Used:

Figure 11-Components of Coal's Landed Cost

A. Components of Coal Cost are:

Base Price of Coal: The price of Coal as disclosed by CIL on its website

Clean Energy Cess: The Tenth Schedule to the Finance Act, 2010 prescribes a

statutory rate of cess of Rs.100 per tonne for all three categories, namely, coal,

lignite and peat.; As per Annexure 2A its Rs 50/MT

Stowing Excise Duty: Every owner, agent or manager of a coal mine is supposed

to provisionally assess the duties of excise levied on the total raw coal dispatched

Million Tonnes

0

20

40

60

FY'08 FY'09

FY'10 FY'11

FY'12 FY'13E

29

49 46 48 51 52

E-Auction Coal by CIL(Million Tonnes) Million Tonnes

51

in a given month and pay the same into the treasury. The remittance is credited to

the Central Govt. in a special account; As per Annexure 2A its Rs 10/MT

Surface Transportation Charge(STC): As per Annexure 2A,its Rs 77/MT

Crushing and Sizing Charge.

Loading Charge

Fixed Royalty[21]

Excise Duty of Basic Price, Sizing charge and Surface Transportation Charge.

CSE of 2 % is also added on the Coal Cost

B. Components of Total Logistics Cost are :

Basic Freight: Indian Railways has divided various commodities under various

classes like Class 100,110,120,130,140,150,160,170,180,190.For Coal Freight

rates, under class 150 is taken into consideration.

Busy Seasonal Charge: Indian Railways has increased the Busy Seasonal Charge

in March 2011 notification from 7% to 10 % in lieu of heavy traffic during some

particular time of the year.

Development Surcharge: Accordingly Indian Railways has also increased the

Development Surcharge from 3% to 5%.

C. Sampling and Analysis Cost: This is the cost involved in carrying out various sample

tests of coal and thus adding A+B+C will give the total Landed cost of coal.

Various Different Mixes of Coal has been taken like 70 % from CCL (FSA Linkage), 10-

15% from imported coal market like South Africa, Indonesia, and remaining %age from

E-Auction and open Market.

Then Weighted Average Cost has been calculated owing to the corresponding GCV value

available after mixing with all qualities of coal.

Per Unit Fuel Cost has been calculated accordingly with different mixes of Coal as shown

in the sheets below.(Please Refer Annexure -2)

As we know that Imported coal has high GCV value so that particular coal cannot be

mixed directly with the other available quality coal, so in order to cope with this problem

blending of coal will done to reduce the effective GCV of coal to a acceptable level.

The above calculation has been described in Annexure 1 & 2.

[21] Royalty: A payment made for the use of property, especially a patent, copyrighted work, franchise, or natural

resource.

52

CHAPTER-5

INTERNATIONAL COAL LINKAGES TO CLP to cope with Coal Shortage

5.1 INTRODUCTION

As CLP has got its FSA signed with CCL (Subsidiary of CIL Ltd.) with trigger point of 80 % i.e.

CCL will supply 80 % of coal of its normative availability. But in the recent notification of CIL,

there will be coal shortage to fulfill its desired targets. So in order to fulfill its desired targets for

imported coal, a detailed analysis for various options has been carried out with respect to various

critical factors that need to be kept in mind to minimize per unit fuel cost for CLP.Various

options are available for CLP as far as coal import is considered. In the following diagram, Coal

reserves across the world have been shown: [10] [11]

Country Coal Resource(MT) Country Coal Resource(MT)

PR CHINA 3162 RUSSIA 248

USA 932 INDONESIA 173

INDIA 538 KAZAKHSTAN 105

AUSTRALIA 353 POLAND 77

SOUTH AFRICA 255 COLUMBIA 74

Table 8- World's Top Coal Producers (SOURCE: www.worldcoal.org)

53

Major Coal Reserves across the world:

Figure 12-SOURCE: World Coal Reserves – www.worldcoal.org

0

50

100

150

200

250

300

350

400

450

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Asia Pacific Years

Europe and Eurasia Years

Middle East and Africa Years

North America Years

South and Central America Years

World Years

54

5.2 BOTSWANA

Botswana Coal Reserves:

Coal is one of the major primary energy sources known in the world, and in Botswana it has over

the decades remained the only fossil fuel resources known to exist in the country

Botswana coals form part of the vast Permian Gondwana Coals preserves in the extensive Karoo

Basins of the Southern Africa, which developed during the late Carboniferous to early Jurassic

times. The Karoo basins hosts all the coals deposit in the region. In Botswana coal is hosted in

sedimentary deposit assigned to the Karoo Super group and are largely preserved in the centrally

located Kalahari Karoo Basin that also extends into southeastern Namibia and Western

Figure 13-Botswana Coal Reserves

Key Regulations and Government Initiatives:

The Ministry of Mineral, Energy and water Resources held a Coal Roadmap Pitso on the 31st

January 2012 under the theme “Botswana Coal Roadmap- Laying Future Coal Development”The

Pitso[22]

was mainly aimed at providing a clear transparent view of the Government’s intentions

for the development of the coal resources thereby giving investors more confidence around their

long term strategy and implementation plans and also to enable investors to engage with

government constructively on the development of the Coal Roadmap and to create a partnership

[22] SOURCE: PITSO Energy Initiative by Govt. of Botswana http://www.mmewr.gov.bw/pitso/energy/

55

between Government and stakeholders in the development of the Coal Roadmap.[23]

COAL ROADMAP

The project is intended to formulate a Strategic Roadmap for development of the Botswana Coal

and Coal bed Methane Resources as the exploitation of these resources are critical to:

1. Meeting the social-economic and energy needs of the country.

2. As well as the diversification of the economy from heavy reliance on diamonds.

3. The projected executed into three phases with:

Findings of the Study

1. Coal exports – Exporting coal into the seaborne market;

2. Domestic power – Using coal to generate electricity for domestic consumption;

3. Export power – Using coal to generate electricity for exports to other SADC countries;

4. Demand for seaborne thermal coal grew from 250 Mt in 1995 to 650 Mt by 2010, an annual

growth rate of nearly 6.7%.

5. These growths are expected to continue, with demand reaching nearly 1,100 Mt by 2025.

Figure 14-Botswana Coal Export Scenario (Ministry of Energy, Mineral & Water Resources

6. Seaborne thermal coal exports are currently dominated by five countries (Indonesia,

Australia, Russia, Colombia, and South Africa).

7. Coal exports, power exports and domestic power are considered the most attractive routes to

Monetizing Botswana’s coal resources with clear synergies existing between the three.

Botswana Coal Qualities: The quality of Botswana’s coal resources compares favorably with

the other coals available in the market and is suitable for export market as:

It is in line with the Indian requirements.

Might also be accepted into European market.

Compares favorably with South African Exports.

[23]SOURCE: Ministry of Minerals, Energy and Water Resources - http://www.mmewr.gov.bw

56

Comparison of Botswana coal qualities against well-known reference brands

Parameter Botswana

(High)

Botswana

(Low)

Newcastle

Benchmark

Richards Bay

Benchmark

Energy kcal/kg 6,000 5,400 6,322 6,300

Total moisture % (ad) 8 10 15 15

Inherent moisture %

(ad)

4 5 - -

Ash % (ad) 13 20 14 16

Fixed carbon (ad) 58 50 - -

Total sulphur % (ad) 0.45 0.8 Less than 0.75 Less than 1.0

Table 9-Botswana Coal Quality (SOURCE: Ministry of Minerals, Energy & Water Resources)

Port & Inland Transportation Facilities

Two routes have been selected based on the detailed geographical analysis:

1. Mmamabula- Lobatse- Ghanzi-Gobabis- Walvis Bay in Namibia,

2. Mmamabula-Ellisras- Pretoria- Matola in Maputo, Mozambique.

ROUTE FROM-TO DISTANCE

1 Mmamabula- Lobatse- Ghanzi-

Gobabis- Walvis Bay in Namibia

1500

2 Mmamabula-Ellisras- Pretoria-

Matola in Maputo, Mozambique

1100

57

Figure 15-Railway Network of Botswana ;SOURCE –African Energy Resourceshttp://www.africanenergyresources.com/projects/botswana/sese-coal-project.html

Strategic Railway Projects in Botswana[24]

Trans Kalahari Railway Project.

Ponta Techobanine Project

Trans Kalahari Railway Project: The objective of the Project:

To provide access to Botswana’s imports and exports.

To relieve roads from deterioration by trucks. The maximum capacity of a wagon is 30

tons which is similar to the maximum tonnage of a truck. However, train can pull

between 34 and 50 wagons & environmental friendly trains.

Recommendations from Traffic Studies Report: Rail Options: Mmamabula to Walvis Bay via

Gobabis, Mmamabula to Walvis Bay via Mariental and Mmamabula to Luderitz. Ports options:

Luderitz Port and Walvis Bay Port

PONTA TECHOBANINE PROJECT:The Government of Botswana, Mozambique and

Zimbabwe wish to construct a rail link terminating at an on- shore deep port at Ponta

Techobaninein Mozambique.

[24]http://www.tlouenergy.com/pdfs/Coal%20road%20map%20Pitso_PS_Overview's%20presentation_31st%20%2

0Jan%202012%20final.pdf

58

Price of Botswana Coal: 90 -100 $/Tonne(Price from Argus Media)

http://www.argusmedia.com/Coal/Argus-McCloskeys-Coal-Price-Index-Report

Geographical Location: Mozambique is approximately 600 nautical miles closer to our Indian

ports. This will make an approximate reduction of $2 to $3 in the freight charges compare to

South Africa. Distance of Ports[25]

from Mozambique in Nautical Mile

Mozambique Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of Beira 4032 4063 4060 5009 4706 4289 4708

Port of

Chinde

3849 3881 3878 4827 4524 4107 4525

Port of

Nacala

3481 3513 3510 4458 4155 3738 4157

Namibia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of

Walvis Bay

6305 6336 6333 7182 6842 6562 6881

Port of

Luderitz

7368 6082 6079 6928 6587 6307 6627

Table 10-Mozambique & Namibia Port Distance from Indian Ports(1 Nautical Mile = 1.852Km)

Mozambique Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of Beira 11.2 11.3 11.3 13.9 13.1 11.9 13.1

Port of

Chinde

10.7 10.8 10.8 13.4 12.6 11.4 12.6

Port of

Nacala

9.7 9.8 14.6 12.4 11.5 10.4 11.5

Namibia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of

Walvis Bay

26.3 17.6 17.6 19.9 19 18.2 19.1

Port of

Luderitz

16.5 16.9 16.9 19.2 18.3 17.5 18.4

Table 11-Days in Transit from Various Ports( Speed of Ship is taken as 15knots/hour)

[25] SOURCE : http://ports.com/sea-route/

59

SWOT ANALYSIS

Strengths

Export quality of Coal is of up to 6ooo

Kcal/kg.

Growth in demand will be driven by the

developing nations of Asia, especially

China and India.

MoU with Zimbabwe and Mozambique

for development of rail route.

Weakness

Under developed Infrastructure

Lack of skills and low productivity of

labor

Lack of Proper geological Data about

the Resources

Opportunity

Quality compares favorably of

Botswana’s coal with the other coals

(accepted in Asia & European Market.

By 2020, 10% of sea borne trade will

come from currently producing basins,

meaning that new coal provinces (such

as Botswana, Mozambique) will need

to be developed.

Trans Kalahari Railway Project &

Ponta Techobanine Project provides

access to Botswana’s imports and

exports market.

Threats

Mozambique Coal Export market

Threats from South African Coal

Markets and Political scenario.

60

5.3 RUSSIA

Russia also officially known as the Russian Federation is a country in northern Eurasia.[20] It is

a federal semi-presidential republic, comprising 83 federal subjects. In 2011, Russia produced

336.3 million ton[26]

of coal. This represents 4% growth over the 2010 total (323.3 million t) and

thus 2011 became the year of a record level in coal production in post-Soviet Russia. Some 90%

of the output was provided by just the 18 largest players in the industry, demonstrating the

concentrated nature of the Russian coal mining business. Since the early 2000s Russia benefits

the status of coal net-exporter. Russia became the world’s # 3 coal exporter (after Australia and

Indonesia) – with approximately 11% in global coal trade. Prior to 2009 Russia’s coal export was

oriented mainly EU – with 73.4% share. Main Russian Coal Basins[27]

are:

Basin Name Hard Coal(Calorific

Value>5700Kcal/Kg)

Brown Coal(Calorific

Value<5700Kcal/Kg)

Podmoscowni Basin 0.3MT

Donetski Basin 4.7MT

Pechorski Basin 11.9MT

Kuznetski Basin 177.1MT

Kansko-Achinski Basin 36.7MT

Buryatia region 5.9MT 8.4MT

Minusinski Basin 10.5MT

Irkutski Basin 6.0MT 4.0MT

Chita region 8.4MT

Khabarovsk region 2.7MT

Primorsk Region 1.1MT 9.2MT

Yakutia region 6.7MT 0.3MT Table 12-Russian Coal Reserves

[26] SOURCE: World Coal Organisation – www.worldcoal.org

[27] Russia Coal Reserves: http://www.hiilitieto.fi/File/20cf94ee-85f7-4a11-be82-

b2693147b0eb/Seminaari+2011_The+Future+of+Coal+in+Russia_Butenko.pdf

61

Figure 16-Russia Coal Basins

Characteristics as well as Classification of Russian Coal:

Type of coal Coal

grade

Vitrinite reflectance

index (Ro) %

Volatile matter % Plastic layer

thickness (Y) mm Anthracite A >2.2 <8 -

Brown coal B < 0.6 10-48 -

Long flame coal D 0.40-0.79 >30 <6

Long flame gas coal DG 0.50-0.79 >30 6-9

Gas coal G 0.50-0.99 >30 6-12

Gas fat semi-lean coal GZhO <99 <38 10-16

Gas fat coal GZh 0.50-0.99 38 16-25

Fat coal Zh 0.80-1.19 28-36 14-26

Semi-lean caking coal OS 1.30-1.79 <20 6-12

Lean caking coal TS 1.40-1.99 <20 <6

Weakly caking coal SS 0.70-1.79 >20 <6

Lean coal T 1.30-2.59 8-18 none

Coke fat coal KZh 0.90-1.29 24-30 >18

Coke coal K 1.00-1.69 24-28 13-17

Coke semi-lean coal KO 0.80-1.39 24-28 10-12

Coke weakly caking low

metamorphic coal

KSN 0.80-1.09 >30 6-9

Coke weakly caking coal KS 1.10-1.69 <30 6-9 Table 13-Classification of Russian Coal

62

Correspondence between the Russian and the US coal classifications [28]

The Russian grades The US grades

D, G High volatile sub-bituminous coal

KZh, K Medium volatile bituminous coal

OS, T Low-volatile bituminous coal

PA; T, A (partially) Semi-anthracite

A Anthracite

A Subgraphite

Table 14-Russian Vs U.S Coal Classifications

Russia Major Coal Mining and Major Ports:

Figure 17-Russian Coal Mining and Major Ports- REUTERS

Russia Export Scenrio:

Russia Exports

Russia exports were worth 46 Billion USD in April of 2012.[21] Historically, from 1994 until

2012, Russia Exports averaged 17.5 Billion USD reaching an all time high of 51.0 Billion USD

in December of 2011 and a record low of 4.1 Billion USD in January of 1994. Metals and energy

make up more than 80 percent of Russia's exports.

[28] SOURCE :RUSSIAN COAL -http://www.rosugol.ru/eng/index.html

63

Figure 18-Russia Export Scenario

Key Points regarding Coal in Russia:

Russia Development aid for coal industry Russian Prime Minister Vladimir Putin

pledged ~US$8Bn in development aid for coal industry by 2030.[29]

[Kuzbassrazrezugol (KRU),Russia’s 2nd

largest thermal coal producer is supplying its

coal to European and Asian countries, and accounting for over 25% of the country’s total

coal export.

[29] SOURCE: http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/commodity-insights-

bulletin/Documents/thermal-coal-q1-2012-April-2012.pdf

64

Existing Rail Scenario in Russia:

Figure 19-Railway Network of Russia : http://eng.rzd.ru/

DISTANCE FROM COAL PRODUCTION AREA TO COAL SHIPPING SEAPORTS:

Origin of coal Seaport Distance, km

East-Siberian Basin Vostochny 3785

Murmansk 6758

Vysotsk 6065

Kuznetsky Basin Murmansk 4805

Kaliningrad 4049

Baltiysky Les 4304

Vyborg 4158

65

Vysotsk 4151

Donetsky Basin Taganrog 289

Tuapse 677

Kansk-Achinsk Basin Murmansk 5246

Vysotsk 4601

Azov 4687

Vostochny 5616

Neryungri Basin Vostochny 2445

Average for Russia 4417

Table 15-Russian Port Distance

Ports and Capacity of Various Coal Terminals:[30]

Vostochny Port: Rated throughput of the Coal Terminal is 12,5 mln tons per year. Four open

storage yards equipped with two stackers and four reclaimers four ship loaders with service rate

of 3,000 tons per hour each. Depths of the berths allow handling vessels up to 150,000 MT dead

weight.

Vanino (Muchke Bay by SUEK): The specifications of Vanino Bulk Terminal (Muchke Bay).

Length of the berth - up to 350 mtr.Deadweight of vessels is handled up to 18meter.

Nakhodka (EVRAZ Group):The Port's piers are allotted to four industrial transshipping

complexes with covered warehouses and storage areas extending over 300.000 m2 in total. The

depths on the fairway, leading to the Port are equal to 10-13 meters.

Posiet (Mechel Group): Loading rate for bulk cargoes at port is 4,000 – 5,000 MT per day. The

Warehouse for general cargoes is 3,000 square meters. Port has three mechanized berths. Total

length is 425 meters. The depth in port is about 9.3–9.8 Mtr which provides entering of vessels

with draft about 9.5 Mtr (Dwt 23,000 – 25,000 MT).

Port of Vladivostok: The Port of Vladivostok is Russia's most southeastern seaport and the

administrative center of the Primorsky territory near the country's borders with China and North

Korea. It exports coal, petroleum, and grain. The Port of Vladivostok has capacity to handle up

to 11 million tons of cargo per year. Its major cargoes include containers, metal products,

vehicles, pulp, and general cargoes.

Name of Coal Terminal Capacity (Million Tonnes/Year)

Vostochny Port 12.5 with service rate of 30,000 T/Hr

Vanino (Muchke Bay by SUEK) 12

Nakhodka (EVRAZ Group) 1 MT/yr

Posiet (Mechel Group) 4000-5000MT/day

Port of Vladivostok 11MT [30] SOURCE: http://www.internationaltransportforum.org/Pub/pdf/04RussRail.pdf

66

Approximate Price of Steam Coal from Russia is 90 $/Tonne. [31]

Geographical Location and Climatic Conditions (Distances in Nautical Miles)[32]

Russia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Vostochny 6852 6613 6883 5709 5797 5678 5797

Vanino 7368 7128 7399 6225 6313 6194 6313

Nakhodka 6852 6613 6883 5709 5797 5678 5797

Vladivostok 6821 6581 6582 5678 5766 5647 5733

Posyet 6758 6518 6789 5615 5703 5584 5703

Table 16-Distance of Russian ports from Indian Ports 1 Nautical Mile = 1.852 Km

Days in Transit from Ports: (In Days)

Russia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Vostochny 19.0 18.4 19.1 15.9 16.1 15.8 16.1

Vanino 20.5 19.8 20.6 17.3 17.5 17.2 17.5

Nakhodka 19.0 18.4 19.1 15.9 16.1 15.8 16.1

Vladivostok 18.9 18.3 19.0 15.8 16.0 15.7 16.0

Posyet 18.8 18.1 18.9 15.6 15.8 15.5 15.3

Table 17-No. of Days in Transit for Coal from Ports

Minutes of Meeting of Coal India with Russian Government:[33]

The 5th meeting of the Working Group on Mines & Metallurgy was held in Moscow on 8-9

October, 2009.

Securing of Coking as well as Thermal Coal deposits in Russia; Russia requested India to

send specific information on Volume demand and qualitative requirement of Coal.

M/s. Zarubezhugol has expressed their interest to continue work on the Indian

investments into the coal industry of Russia and also expressed their interest in export of

non-coking and coking coal.

Giproshakht and VNIMI have requested the Indian side to expedite the signing of

Memorandum on Cooperation between Giprosphakht and VNIMI with CMPDIL

The Working Group noted the readiness of Zarubezhugol and Giproshakht to train the

Indian experts on a contract basis in the research and design institutes on modern

technologies of designing of coal (underground and coal open-pit mining), designing and

manufacture of the modern mountain-mine equipment, for acquaintance with modern

technologies for both OC and OG mining.

[31] SOURCE : http://www.argusmedia.com/Coal/~/media/64A780EA340844ECA9D534AD99FD7AE2.ashx

[32] SOURCE: http://ports.com/sea-route/

[33] SOURCE : http://coal.gov.in/fc.htm#CO-OPERATION_WITH_RUSSIA

67

SWOT Analysis:

Strengths

19% of the world Coal reserves.

Ranked 3rd in World Coal Reserves.

IEA noticed adequate port and railways

facilities to enhance exports.

Good Example of Govt.-Industry

cooperation in case of SUEK w.r.t.

Vanino Port.

Weakness

Infrastructural Challenges.

Non-Importer of Skilled Labour.

Less Private Sector Involvement as

compared to other countries Australia,

US etc.

Unbalanced Tariff Policy for Railway

Conveyance.

Opportunities

3rd Largest Exporters in World

Country’s coal output may rise 32% to

420 million tpa by 2030.

Russia will increasingly move from the

Atlantic to the Pacific coal export

markets.

Threats

Stiff Competition from Gas Sector in

the country.

Competition from other efficient coal

exporting countries.

The "China" Factor.

68

5.4 SOUTH AFRICA

As per BP Statistical Review 2012[34]

South Africa has huge coal reserves of 30156 Million

Tonnes encompassing a total of 3.5 % share of the world’s total coal reserves. About 77 percent

[23]of South Africa's primary energy needs are provided by coal addition to the extensive use of

coal in the domestic economy, about 28 percent of South Africa's production is exported,[24]

mainly through the Richards Bay Coal Terminal, making South Africa the fourth-largest coal

exporting country in the world. [35]

Figure 20-South Africa Coal Reserves

These companies are: Ingwe Collieries Limited, a BHP Billiton subsidiary,Anglo Coal,Sasol,

Eyesizwe; and Kumba Resources Limited, accounting for 85 percent of the saleable coal

production.Production is concentrated in large mines, with 11 mines accounting for 70 percent of

the output. South African coal for local electricity production is among the cheapest in the world.

The beneficiation of coal, particularly for export, results in more than 65Mt of coal discards

being produced every year.

[34] SOURCE: http://www.bp.com/sectionbodycopy.do?categoryId=7500&contentId=7068481

[35] SOURCE: http://www.saimm.co.za/Journal/v087n11p371.pdf - By BC Albert

69

Coal Fields in South Africa:

The most prominent Coal Field in South African are: Waterberg Coalfield, Highveld Coalfield,

Witbank Coalfield, Ermelo Coalfield, Utrecht Coalfield & Klip River Coalfield.

Specifications of Coal Grade Available in South Africa:[36]

Coal Type Bituminous

GCV Value 6250(GAR) & 6700(GAD)

%Moisture 10%

%Ash 16%

%Sulphur 0.90%

%Volatile Matter 24%

%Fixed Carbon 57%

HGI 45

Table 18-Coal Grade Specifications in South Africa

KEY REGULATION IN SOUTH AFRICA

The corporate tax in South Africa is 28 percent. And the royalty charges for coal is depends upon

the percent of ash content and it is 3% for the coal having less than 15 % ash content and 1% for

coal with greater than ash content.

Coal Exports from South Africa:

South Africa exports coal to 34 countries, of which 84,5% is destined for Europe, where the UK,

Spain, France, Italy and Germany are the biggest customers; however, demand is decreasing in

this region. In Asia, exports have increased by 403%, driven by increased energy needs in the

region.

[36] SOURCE: www.COALSPOT.com

70

Figure 21-South Africa Coal Exporting Countries

Coal Rail Infrastructure [37]

A major current constraint in moving coal to markets, particularly export markets, is South

Africa’s aging and inefficient rail infrastructure. Nearly all of South Africa’s export coal is

transported via rail from the central coal basin to Richards Bay on the East Coast. The national

state-owned rail monopoly, Transnet, owns and operates a dedicated coal track from Witbank to

the sea, a distance of 580km. [38]

the double line is bi-directionally signaled and fully electrified.

Two 100-wagon trains are coupled to form one 200-wagon train at Ermelo, in Mpumalanga,

typically using CCL-type wagons. There are approximately 28, 200-wagon set trains in operation

on the coal line at any given day.

[37] SOURCE: Ministry of South African Railways - www.info.gov.za/aboutgovt/dept.htm/

[38] SOURCE: http://www.railwaysafrica.com/

71

Figure 22-South African Rail Network

The Waterberg field is 1050km from the coast and does not yet have a dedicated coal rail link to

Richards Bay. Currently, small amounts (less than 1 Mtpa) are railed from the Waterberg via the

existing Transnet Freight Rail network. Transnet is undertaking feasibility studies on expanding

the coal link to Richards Bay, initially to 81 Mtpa by 2014/5 and thereafter to 91 Mtpa.

Richard’s Bay Port Terminal & its Specifications:[39]

The Richards Bay Coal Terminal (RBCT), located in the Richards Bay harbour, is the largest

coal export facility in Africa with a planned a capacity of 91 Million tonnes per annum.

[39] SOURCE: Richard’s Bay Coal Terminal - www.rbct.co.za/

72

COOPERATION WITH SOUTH AFRICA A Working Group was constituted on 3rd

March,

2003 Chaired by the Secretary, Ministry of Coal, Govt. of India with Director General (Coal &

Mines) Republic of South Africa as Co-Chairman. The following areas were identified for co

operation by the visiting South Africa delegation in August, 2002.

Beneficiation of Coal

Technology for conversion of coal to oil.

Price of South African Coal = 85.50 $ per Metric Tonne (www.coalspot.com)

GEOGRAPHICAL LOCATION AND CLIMATIC CONDITIONS [40]

South Africa Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnum

Richard’s

Bay(Distance)

4612 4645 4642 5488 5149 4869 5187

Transit

Time(Days)

12.8 12.9 12.9 15.2 14.3 13.9 14.4

Table 19-Distance of Richard's Bay Coal terminal from Indian Ports

[40] SOURCE: http://ports.com/sea-route/

4612 4645 4642

5488 5149

4869 5187

Distance of Richard's Bay Coal Terminal from Indian Ports(in Nautical

Mile)

Distance(in Nautical Mile)

12.8 12.9 12.9

15.2 14.4 13.9 14.4

No. of Days in Transit from Richard's Bay C.T

Days in Transit

73

SWOT Analysis of South Africa.

Strengths

Coal for Export is available after

Washing- A homogeneous Product

Close to the West Coast of India

Cheap Labor Costs

Good Port availability

Weakness

Even though RBCT is of 91 Mtpa but the

rail capacity is 62 Mtpa only.

Rail Network is operating at Full

Capacity

Opportunities

By product from coal washery can be

sold to local Power Producers.

Coal from Waterberg is still to be

tapped.

Threats

Local electricity market is heavily

dependent on coal, so possibility for

export Cap in future.

Uncertainty in their railway expansion

74

5.5 MOZAMBIQUE

Coal Reserves [41]

Mozambique is one of the African country located near to South Africa is having a small amount

which are yet to be explored. After the end of civil war 1993 the country has a stable government

and the country is moving in the developing path.

The coal reserves in Mozambique are mainly distributed in the Tete province which is located at

the centre of the Mozambique. So far three major coal fields has been identified in the Tete

province which are

1. Benga Coalfield

2. Moatize Coalfield

3. Zambeze Coalfield

According to the National director of Mines, Mozambique, there is a possibility of coal reserves

in the Maniamba basin in Lago district, in the Northern Province of Niassa.[25]

Figure 23-Mozambique Coal Reserves

[41] SOURCE: http://en.wikipedia.org/wiki/Tete_Province

75

Comparison of Mozambique coal qualities against well-known reference brands

Country Mozambique Richards

Bay(South Africa)

Newcastle

(Australia)

GCV (kcal/Kg) 6000 6300 6300

Ash % ad 22 15 13

Sulphur% 0.8 1 0.7

Total Moisture% 8 8.7 8.1

Table20-Mozambique Coal Quality

Government Initiatives and Key Regulations[42]

A favorable context to investment is being experience nowadays in Mozambique and it deserves

a special attention. Amore relevant aspects of the recent tax benefits “package” approved by the

Parliament by the Government of Mozambique, through Law 4/2009, of 12th

January (Code Of

Fiscal Benefits or CFB) and Decree 56/2009, of 7th

October (Regulation of the Code of Fiscal

Benefits or RCFB).

Tax Benefits:

Exemption from payment of customs duties and VAT on import of construction material

machinery ,equipment, accessories, parts and other goods

Tax credit per investment

Fiscal Information:[26]

Corporate income tax 35%

A 50% reduction is allowed for a period of ten years from the start of production.

Export Promotion Policy[27]

Export Promotion Policy- for the implementation of the trade policy, the following strategic

action is to be undertaken by the Government of Mozambique.

1) To promote and support initiatives aimed at a continuing diversification of products

destined for exports.

2) To consolidate and obtain access to new markets for export products, in particular

3) [42] SOURCE :Government of Mozambique http://www.portaldogoverno.gov.mz/

76

4) non-traditional products

Mozambique and India[43]

Memorandum of Understanding (MoU) for co-operation for development of coal mining in

Mozambique exists between Government of India and Government of Mozambique. Second

Meeting of Indo- Mozambique Joint Working Group has held in New Delhi on 30th

March, 09.In

the meeting CIL made two presentations. The first one elaborated the core competence of CIL in

the field of exploration, mine planning and mining CIL’s offer in the area of Rehabilitation and

Resettlement, Corporate Social Responsibility, Community Development etc. in Mozambique.

The second presentation explained in details the progress in bilateral cooperation between two

countries since first JWG meeting held in Maputo in May, 2006.Further to promote Indian

interest in Mozambique, Government of India is considering approval of sovereign fund for the

development to Apex Planning Organization (APO) and Apex Training Organization (ATO) to

look after scientific mine planning in coal. Foreign investment is allowed in all sectors except

those which are expressly reserved for the ownership or exclusive operation by the Government.

PORT AND INLAND TRANSPORTATION FACILITIES [44]

Mozambique is having 600 Km rail connectivity from Tete province to Port of Beira is having a

name plate capacity of 12-13 Mtpa. There was a plan to expand the port capacity and railway

infrastructure to 25- 33 Mtpa by 2020.The government of Mozambique has signed a MoU for the

construction of 900 Km rail link from Tete province to the Port of Nacala.[28]

[43] SOURCE: http://coal.gov.in/fc.htm#COOPETATION_WITH_MOZAMBIQUE

[44]Trade Policies of Mozambique

http://qed.econ.queensu.ca/faculty/flatters/writings/ff_mozambique_trade_policy.pdf

77

The major ports in Mozambique are the Port of Beira and Port of Nacala.

Figure 24-Major Ports in Mozambique

Railway Infrastructure:[45]

The railway lines of the Beira corridor are:

1. The Beira- Machipanda line, 317 Km, connecting Beira to Zimbabwe

2. The Sena Line, 578Km, not operational

3. The Imhamitanga-Marromeu Line, 88 Km not operational

Figure 25-Beira Corridor Railway Infrastructure

[45] SOURCE:

http://www.fdi.net/documents/WorldBank/conferences/mining2000/Africadata/Mozamb/MAR/mozsupp.pdf

78

Railway lines of the Nacala Corridors are:

1. The Nacala- Cuamba- Entre- Lagos Line, 610 Km to the border of Malawi, fully

rehabilitated in 1996.

2. The Cuamba- Lichinga Line, 262 Km

3. The Lumbo- Monapo line, 42Km not operational.

Mozambique, Malawi and Zambia have joined forces on a US$ 24 million project for the Nacala

development Corridor, which include the rehabilitation of 77 Km of railway line from Malawi to

Entre Lagos in Mozambique, the construction of a bridge at Chiromo, and the extension of the

railway line from Mchinji to Chipata in Zambia.

GEOGRAPHICAL LOCATION AND CLIMATIC CONDITIONS[46]

: Compared to South

Africa, Mozambique is approximately 600 nautical miles closer to our Indian ports. This will

make an approximate reduction of $2 to $3 in the freight charges. This is an added advantage for

importing coal from Mozambique.The sea distance from major Mozambique ports is:

Namibia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of

Beira

4032 4063 4060 5009 4706 4289 4708

Port of

Chinde

3849 3881 3878 4827 4524 4107 4525

Port of

Nacala

3481 3513 3510 4458 4155 3738 4157

Table 21-Distance of Namibia Port from Indian ports

Namibia Mundra Pipavav Navlakhi Paradip Gangavaram Ennore Vishakhapatnam

Port of

Beira

11.2 11.3 11.3 13.9 13.1 11.9 13.1

Port of

Chinde

10.7 10.8 10.8 13.4 12.6 11.4 12.6

Port of

Nacala

9.7 9.8 14.6 12.4 11.5 10.4 11.5

Table 22-No. of Days in Transit of ship from Namibia Port to Indian ports.

[46] SOURCE: http://ports.com/sea-route/

79

SWOT ANALYSIS OF MOZAMBIQUE

STRENGTHS

Export quality is of up to 6700 Kcal/kg

Compared to south Africa 600 Nm

closer to India

Fastest growing African Country

Politically stable since 1992 after the

civil war

WEAKNESS

Under developed Infrastructure

Lack of skills and low productivity of

labor

Lack of Proper geological Data about

the resources

OPPORTUNITIES

Internal logistics through Zambezi

River will reduce the transportation

cost to Port

Opportunities for Mine mouth Power

Plant which can supply to the power

starving South African power Pool

Market

THREATS

New & Small Market

Filled with Tribal people

Small country & Uncertainty about the

development, regulatory

80

5.6 INDONESIA

Indonesia is going to play a major role in the coal markets, particularly thermal, in the short to

medium term.According to the 2011 BP Statistical Energy Survey;[19] Indonesia had end 2009

coal reserves of 5529 million tonnes, 0.60% of the world total.

Indonesia Coal Reserves:[47]

The Indonesian coal deposits are predominately found on the islands of Sumatra and Kalimantan.

The sub-bituminous to bituminous tertiary coals of South East Asia are fundamentally different

from the geographically close Permotriassic Gondwana coals found in Australia,India and South

Africa. In general, the majority of the coal is Paleogene in age but high sea levels during the

beginning of this period resulted in deposition of mainly marine sediments and whilst the coal

was formed during the Neogene [33]period it tends to be of a lower rank. The existence of higher

rank coals at the land surface is dependent on uplift or the presence of igneous intrusions.

Figure 76-Indonesia Coal Reserves

[47] SOURCE

http://www.jcoal.or.jp/publication/seminar/pdf_for_hp_indonesia_s/indonesiacoal_indutry_outlook_english.pdf

81

Coal Quality Available in Indonesia: [48]

Various Qualities of Coal are available in Indonesia

Following are the various grades of Coal.[32]

In Indonesia around 62 percent of the coal reserves are of the quality of medium quality (5100-

6100 kcal/kg), 24 percent of low quality( less than 4100 kcal/kg), 13 percent of high

quality(6100-7100 kcal/kg) and 1 percent of very

high quality ( greater than 7100 kcal/kg).

[48] SOURCE: www.coalspot.com

13% 1%

24% 62%

Indonesian Coal Specification based on GCV High Quality(6100-7100Kcal/Kg)

very High Quality(>7100Kcal/Kg)

Low Quality(<5100Kcal/kg)

Medium Quality(5100-6100Kcal/kg)

Product Type of

Coal Port/Terminal GCV(GAR) GCV(GAD) %Moisture(AR) %Ash(AR) %Sulphur(AR)

%Volatile

Matter

Indonesian

"A" Bituminous Kalimantan 5,700.00 6,200.00 18.00 10.00 0.90 40.00

Indonesian

"B" Bituminous Kalimantan 5,600.00 6,100.00 19.00 8.00 0.60 40.00

Indo Sub-

bit 1

Sub-

Bituminous Kalimantan 5,000.00 5,900.00 26.00 8.00 0.60

40.00

Indo Sub-

bit 2

Sub-

Bituminous Kalimantan 4,700.00 5,650.00 30.00 8.00 0.50 44.00

Indo Low

Q 1

Sub-

Bituminous Kalimantan 4,200.00 5,500.00 36.00 8.00 0.50 45.00

Indo Low

Q 2

Sub-

Bituminous Kalimantan 4,000.00 5,300.00 39.00 8.00 0.50 45.00

Table 23-Indonesia Coal Quality

82

Key Regulations in Indonesia:

In January 2009, the GOI, after years of aborted efforts, finally passed a new mining law,

officially known as Law No. 4 of 2009 on Mineral and Coal Mining (Law 4/2009)

SALIENT FEATURES OF OLD MINING LAW[49]

Mining can only take place in zones designated by the national government as open for mining

(Wilayah Pertambangan or WP).[36] Mining zones can be of three types:

Mining business areas (Wilayah Usaha Pertambangan or WUPs), which are areas open to

private businesses on a competitive tender basis;

Community mining areas (Wilayah Pertambangan Rakyat or WPRs), which are reserved

for community mining activities; and

State reserve areas (Wilayah Pencadangan Negara or WPNs), which are areas reserved

for the strategic national interest and reserved for government-owned corporations.

New mining authorizations for private companies will be in the form of mining permits known

as Izin Usaha Pertambangan (IUP) with separate IUPs issued for exploration (IUP Eksplorasi)

and for production (IUP Operasi Produksi).

Exploration permits can only be issued through a transparent commercial tender. However, once

a company is awarded such a permit, it is guaranteed the right to an IUP Operasi Produksi

(production permit) without needing to go through a new tender as long as it has fulfilled the

terms of its exploration permit.

Within nine years of commercial production, foreign investment companies holding mining

licenses will be required to divest a minimum of 20 percent of the issued capital of the IUP or

IUPK holder to Indonesia nationals. Each coal producer has to meet Domestic Market Obligation

(DMO) that is percentage of coal production each coal producer has to make available for the

domestic market. Every calendar year the DMO will be varying and the percentage of DMO

be decided by the Ministry of energy and mineral resource. The DMO will never exceed 35

percent of the producer’s total production. The reference price will be fixed by the government

for every month.

[49] SOURCE: http://www.coaldynasty.com/about/location-n-coal-mine.aspx

83

Key Aspects of New Mining Law April 2012:[50]

Indonesia has jumped on the resource nationalism bandwagon with the adoption of Government

Regulation No. 24 of 2012 (“GR 24/2012”), which in effect paves the way for a local takeover of

majority control of foreign‑owned mining concession companies.On 21 February 2012, the Gov

ernment of Indonesia issued GR 24/2012,which amended Government Regulation No. 23 of 201

0 (“GR 23/2010”).GR 24/2012 and GR 23/2010 implement Indonesia’s Law No. 4 of 2009 on

Minerals and Coal Mining (“2009 Mining Law”).

Divestment of Majority Stake and Timeline:

GR 24/2012 limits foreign ownership in mining concession companies to 49% by the tent

h year of production.This is a dramatic extension of the divestment obligation contained i

n GR 23/2010, which stipulates a maximum foreign ownership threshold of 80% from the

fifth year of production.

Transferability of Mining Licenses:

GR 24/2012 provides an exception to the 2009 Mining Law s absolute restriction on the

transfer or assignment to another party of a mining business permit/special mining

business permit (IUP/IUPK).

Salient Features of FDI Policies:[35]The FDI may be established in the form of either.

Joint venture between foreign capital and domestic capital owned by

Indonesian citizens, and/or Indonesia legal entities

Straight investment, in the sense of that the entire capital is owned by

foreign citizens and/or foreign legal activities

The Indonesian partner's shares in the joint venture company shall be at least five percent (5%)

of the total paid-up capital of the company upon its establishment.

The corporate tax in Indonesia is 25 cent. The royalty charges are for Open cut mines it is 3 to 7

percent depends upon the quality of coal and for underground it is 2 to 6 percent depends upon

the quality.

Price of Indonesian Coal:

Price of Indonesian Coal of GCV value 6322Kcal/kg - 87.56 US $[51]

[50]: http://www.wfw.com/Publications/Publication1060/$File/WFW-IndonesiaNewRegulations-April-12.pdf [51] The price reference, Harga Batubara Acuan (HBA) is an average of the Indonesia Coal Index, Platts-1,

Newcastle Export Index and the global COAL NEWC Index from the previous month. - The average of price

reference for the last three months is used to set prices for a one-year contract for the following year. - Ticker is

FOB. For sales in barge, the reference price is excluding cost of barging and transshipment into vessel. The HBA is

used to calculate prices for eight other leading coal brands.

84

Port and Inland Transportation Facilities:

As Indonesia is filled with Islands, the transportation of coal through Tug pulling barge is

common system. The Infrastructure in Kalimantan is in very good stage compared to Sumatra, as

Kalimantan accounts for more than 75 percent of the coal production in the country.

The advantages of Barge and Transshipment facilities are

1. Low cost compared to the Trucks

2. Shorter gestation period to build Floating Transshipment facility compared to Port.

3. Low capital cost & easily expandable too.

Major Coal Ports of Indonesia are as :

EAST KALIMANTAN COAL HANDLING PORTS[52]

Port name Capacity tonnes/day

Balikpapan Coal terminal 30,000-40,000

Bontang Coal terminal 40,000

Tanah Merah Coal terminal 40,000

Tanjung Bara coal terminal 70,000-80,000

Teluk Adang 8,000-12,000

Teluk Apar 8,000-10,000

M uara Berau/M uara Jawa 8,000-10,000

Muara Pantai 12,000-20,000

Tarakan 8,000-10,000

SOUTH KALIMANTAN COAL HANDLING PORTS

Port name Capacity tonnes/day

North Pulau Laut 35,000-40,000

South Pulau Laut 35,000-40,000

Jorong anchorage 8,000-12,000

Sebuku anchorage 8,000-12,000

M uara Satu i anchorage 8,000-12,000

Taboneo anchorage 8,000-20,000

Tanjung Petang anchorage 8,000-12,000

SUMATRA COAL HANDLING PORTS

Port name Capacity tonnes/day

Kertapati Jetty 5,000-6,000

Muarasabak (anchorage) 6,000-7,000

Pulau Baai 6,000-7,000

Tarahan Coal Terminal 25,000-30,000

Teluk Bayur port 8,000

[52] SOURCE: http://www.worldportsource.com/ports/IDN.php

85

Geographical Location and Climatic Conditions:

Compared to other coal importing countries, Indonesia is the closest one to our Indian ports both

in east coast as well as west coast.

The sea distance from Indonesian port to various ports in India[53]

is given below

INDONESIA Mundra Navlakhi

Pipavav Paradip Gangavaram Ennore Vishkhapatnam

East

Kalimantan

4298 4329 4058

3155 3251 3124 3243

South

Kalimantan 4147 4178

4055 3442 2087 2973 3129

Sumatra 3332 3363 3092 2195 2291 2158 2283

Table 24-Distance of Indonesian Ports and Indian ports

And the approximate travelling time from Indonesian ports to our Indian ports is

INDONESIA Mundra Navlakhi

Pipavav Paradip Gangavaram Ennore Vishkhapatnam

East

Kalimantan 11.9 12 11.3 8.8 9 8.7 9

South

Kalimantan 11.5 10.4 9.7 8.3 5.8 8.3 8.6

Sumatra 9.3 9.3 8.4 6.1 6.4 6 6.3

Table 25-No.of Days in Transit for Cargo from Indonesian Ports to Indian ports

The extreme variations in rainfall are linked with monsoons. Generally speaking, there is a dry

season (June to October), influenced by the Australian continental air masses, and a rainy season

(November to March) that is the result of- Asia and Pacific Ocean air masses.

Apart from the rainfall, the constraints like tsunami and earth quake is also a concern, as these

changes in climate will affect the coal production and its associated activities like loading,

transportation and the turnaround days for the ships.

[53] SOURCE: http://ports.com/sea-route/

86

SWOT ANALYSIS of Indonesian Coal

Strengths

Nearest To India - Logistics Rates

will be lower.

Good Connectivity to Port.

Internal Rivers- Tug Pulling

Barge system.

Floating Transshipment Facilities

of 170 Mtpa

Weakness

Poor in Quality compared to other

countries.

Poor Land Transportation in

Indonesia

Opportunities

Sumatra is Very Close to India

and still a lot of mine resource is

available to explore.

Threats

Uncertainties in Government

regulations.

Prone to natural calamity like

earthquake & Tsunami.

Other countries also eying the

reserves

87

5.7 AUSTRALIA

Australia is the fourth largest producer, the largest exporter, and has the fourth largest reserves

of coal in the world. Coal accounts for around three quarters of Australia’s electricity

generation, with coal-fired power stations located in every mainland state. Queensland and

NSW account for almost all of Australia‘s coal production and all of its exports.[37]

Australia Coal Reserves:[55]

Geoscience Australia estimates that Australia had, as of December 2009, black coal EDR of 43.8

billion tonnes with the bulk of those reserves located in Queensland (58 percent) and NSW (38

percent)12

. Both states also accounted for 96 percent of Australia‘s 2008 coal exports. Australia

has about 7% of the world's economically recoverable black coal and ranks fifth behind USA

(31%), Russia (22%), China (14%) and India (8%).

Recoverable economic demonstrated resources (EDR) in 2009 increased 11.5% to 43.8

gigatonne (Gt) due mainly to significant increases at Blackwater, Dawson, Goonyella, Hail

Creek, Peak Downs, Saraji, Wandoan, Mount Arthur, Oaklands North and Ulan. These increases

offset large decreases at New Acland, Moranbah South and the Hunter Valley Complex.

Queensland (58%) and NSW (38%) had the largest share of recoverable EDR in Australia. The

Sydney Basin (31%), Bowen Basin (35%) and the Surat Basin (9%) contain most of the

recoverable EDR in Australia.

Black coal is found in Queensland and New South Wales, and is used for both domestic power

generation and for export overseas. Black coal was also once exported to other Australian states

for power generation and industrial boilers.

Brown coal is found in Victoria and South Australia, and is of lower quality due a higher ash

and water content.

[54] SOURCE: AUTRALIAN COAL ASSOCIATION

88

Figure 27-Australia Coal Reserves: www.australiancoal.com.au

Figure 28-Australia Coal Mine Areas

89

Key Regulations in Australia:[55]

The foreign investment policy provides for Government scrutiny of many proposed foreign

purchases of Australian businesses and properties. The Government has the power under the

Foreign Acquisitions and Takeovers Act 1975 (the Act) to block proposals that are determined to

be contrary to the national interest. The Act also provides legislative backing for ensuring

compliance with the policy.

Under the Act, the foreign person:

a corporation in which a natural person not ordinarily resident in Australia or a foreign

corporation holds a controlling interest (that is, a holding of 15 percent or more);

a corporation in which 2 or more persons, each of whom is either a natural person not

ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling

interest (that is, a total holding of 40 percent or more);

the trustee of a trust estate in which a natural person not ordinarily resident in Australia or

a foreign corporation holds a substantial interest; or

The trustee of a trust estate in which 2 or more persons, each of whom is either a natural

person not ordinarily resident in Australia or a foreign corporation, hold an aggregate

substantial interest.

A substantial foreign interest occurs when a single foreigner (and any associates) has 15

per cent or more of the ownership or several foreigners (and any associates) have 40 per

cent or more in aggregate of the ownership of any corporation, business or trust. The

corporate tax in Australia is 30%. [40]

The royalty charges are different for Queensland and New South Wales. For Queensland

it is 7percent where the value of the coal produced does not exceed $100/tonne and 10%

on the value of the coal exceeding $100/tonne. And for New South Wales the charges

are for open cut mining 8.2%, underground mining-7.2%, and deep Underground mining

6.2%. Australia will have fixed carbon tax of A$23 ($23.78) a tonne on the top 500

[55] SOURCE: http://adl.brs.gov.au/data/warehouse/pe_abarebrs99000349/pc10683.pdf

90

polluters from July 2012.

Quality of Coal: [57]

Australia is having the world’s richest coal resources. Compared to

the other major coal resourcing countries, Australia’s coal GCV value ranges from 5800

kcal/kg to 7100 kcal/kg.[42]

Coal Quality Parameter Southern Western Hunter Newcastle Gunnedah

GCV(kcal/kg) As GAD 6750 6600 6810 6760 7050

GCV(kcal/kg) As GAR 6390 6220 6360 6330 6515

Total moisture (%) 6.4 8 9.1 8.5 9

Inherent moist (%) 1.1 2.6 2.7 2.3 1.5

Ash (%) 19.5 20.4 13.5 15.1 17.5

Volatile matter (%) 20.8 28.7 32.7 30.6 26.8

Total Sulphur (%) 0.45 0.55 0.6 0.6 0.65

Table 26-Australian Coal Quality

Major Coal Ports in Australia:The government of Queensland owns the four coal

ports through three government corporations The Port Corporation of Queensland, which

owns and operates the ports of Abbot Point and Hay Point. The Gladstone Ports

Corporation, which owns the Port of Gladstone &The Port of Brisbane.

The major coal importing ports in Queensland are

Port Name Present Capacity in MTPA Expansion Plans in Mtpa

Abbot Point 25 50

Brisbane 30 No activities

Dalrymple Bay 85 26

Gladstone 79 25

Hay Point 44 11 Table 27-Major Coal Ports in Queensaland,Australia

The Port of Abbot Point is owned and operated by the North Queensland Ports

Corporation Ltd. (NQPC), a government-owned corporation.The Port of Gladstone is

owned and operated by the Gladstone Ports Corporation (GPC), a government- owned

corporation previously known as the Central Queensland Port Authority. The port of

Gladstone is having two coal importing terminals which are Barney Point Coal Terminal

with a throughput capacity of 7 MTPA and RG Tanna Coal Terminal with a 2008

throughput capacity of 72 MTPA. To meet industry needs for additional coal handling

capacity, GPC is supporting the development of a new coal terminal, known as the

[56] SOURCE: www.coalspot.com

91

Wiggins Island Coal Export Terminal (WICET), within the Port of Gladstone. WICET

will be operational by 2013 with an initial capacity of 25 MTPA. Port of Hay Point: The

Port of Hay Point is owned and operated by the North Queensland Port Commission

(NQPC).The major coal importing ports in New South Wales[57]

Port Name Present Capacity in mtpa Expansion Plans in mtpa

Newcastle-Kooragang Coal Terminal 77

Newcastle-Carrington Coal Terminal 25

Newcastle Coal Infrastructure Group

(NCIG) terminal

30 66

Port Kembla 18 No Activities

Table 28-Major Coal Ports in NSW,Australia

[57] SOURCE: www. resources.nsw.gov.au

92

Railway expansion from existing to new infrastructure in Queensland:

Figure 89-Railway Expansion plans in Queensland

Geographical Location and Climatic Conditions:

Compared to other coal importing countries Australia is the farthest one from the Indian

Ports. Out of Queensland & NSW, Queensland ports are closer to Indian Ports by an

approximate distance of 700 to 850 Nautical miles.

AUSTRALIA

QUEENS LAND Mundra Navlakhi Paradip Gangavaram Ennore Vishkhapatnam

ATNAM Abbot Point 6434 6465 5297 5385 5260 5385

Brisbane 6984 7015 5847 5935 5810 5935

Dalrymple Bay 6540 6571 5404 5492 5366 5492

AUSTRALIA( NEW

SOUTH WALES) Mundra Navlakhi Paradip Gangavaram Ennore Vishkhapatnam

ATNAM Port of New Castle 7384 7415 6247 6335 6210 6335

Port Kembla 7591 7622 6414 6542 6417 6542

AUSTRALIA

QUEENS LAND Mundra Navlakhi Paradip Gangavaram Ennore Vishkhapatnam

ATNAM Abbot Point 17.9 18 14.7 5385 14.6 15

Brisbane 19.4 19.5 16.2 5935 16.1 16.5

93

Dalrymple Bay 18.2 18.3 15 5492 14.9 15.3

AUSTRALIA( NEW

SOUTH WALES) Mundra Navlakhi Paradip Gangavaram Ennore Vishkhapatnam

NAM Port of New Castle 20.5 20.6 17.4 17.2 17.3 17.6

Port Kembla 21.1 21.2 17.9 17.4 17.8 18.2 Table 29-Distance of Australian Ports and No. of Days for Cargo from Indian ports SOURCE: http://ports.com/sea-route/

Recently the climate conditions in Australia are changing quite abnormally. Last year

there was a heavy flood in Queensland. It has made most of the coal mines to shut their

production, which has hampered the coal export from Australia.[41]

Price of Australian Coal is 84.68$ /Tonne

SWOT Analysis of Australian Coal:

Strengths

Maximum Coal mines are of

rich quality of around 6000 –

6600 Kcal/kg.

Good Port Capacity of around

420 Mtpa.

All coal mines are located close

to Ports

Weaknesses

Longer sea distance to India

Poor weather Conditions leads

to longer Turnaround days for

the ships.

Need to keep more Inventory

due to longer travel time

Opportunities

Surat Railway Basin link and

Northern Missing link will

improve the Rail capacity

Threats

Mining Resource Rent Tax

Carbon Tax

Climate change

94

CHAPTER-6

6.1 CONCLUSION

Coal is widely dispersed throughout the world. But the best feasible countries for

importing India are Indonesia, Australia, South Africa, Botswana, Russia and

Mozambique. Out of this six countries ranking is difficult as each country is having their

own pros and cons.

As India is having two coasts –east and west coast, the suitable coal sourcing will be

depending on the port location in India. For our analysis purpose we have taken

Gangavaram, Vishakhapatnam and Ennore on the east coast and Mundra, Navlakhi and

Pipavav on the west coast.

There are certain constraints in the decision making of the importing options. The

constraints are

Sea Distance and Days in Transit

Quality of coal

Regulatory aspects

Consistency of delivery.

Quality of Coal:

As per the analysis Australia is having the best quality coal with Highest GCV value

(ARB) of around 6700-7000 kcal/kg, Next comes the turn of Russian coal &

Mozambique Coal with somewhat closer GCV value to the Australian Coal. South

Africa coal needs washing as it is having higher ash content. So washing will give a

homogenous product but leading to increase in landed cost for coal. Indonesia is having

the least GCV quality (4200 kcal/kg to 5800 kcal/kg),and this coal is having a high

moisture content of around 25 to 40 per cent leading to further problems for Indian

Power plants.

Distance of Indian Coal Ports from Major Countries Coal Terminals:

The Distance and numbers of days in transit has of Coal Terminals has been a major

issue for Indian thermal power plants. As per Research, African countries like

95

Mozambique, Botswana score over others. Number of days in transit is approximately

14-15 days as compared to other available options.

Regulatory Aspects:

The regulatory is the common problem for all the countries. Most of the countries

introduce attractive regulatory policies during their developing stage and once they have

attained their target level in that particular sector, in order to protect the domestic

players, they will make strict regulations for the foreign players. Indonesia has been

playing a major game like luring foreign importers coal from Indonesia and then

imposing stringent restrictions in Coal mining of divestment of around 51 % stake with

domestic producers.

Consistency of Delivery:

In view of consistency, African countries, Australia, Indonesia have enough reserves

and as per the present consumption pattern the coal reserves in Indonesia will last for

another 18 to 20 years. South Africa is good resources but the inland transportation

facilities are the biggest constraint. Right now Mozambique is not having a good

infrastructure, but they have made a target to attain a capacity of 55 million tonnes by

the year 2025 whereas Botswana has decided on “Coal Roadmap” to make the things

clearer on coal transport. Russia can be biggest advantage for Indian importers but the

Chinese factor can come as roadblock in the way for Indian Coal importers.

Thus, African countries are the viable options for coal import for Indian thermal power

plants that have untapped potential of coal reserves and respective governments of these

countries are taking adequate steps to allow foreign investment in the country.

96

6.2 RECOMMENDATIONS

Coal will remain a major source of fuel especially for power generation. Coal sector in

India has shown consistent growth but the demand supply mismatch is a major concern.

For a thermal power plant like CLP which is suffering from coal shortage issue need to

look for wider options to secure coal supply. Some of the recommendations which can

be listed out from the research done are:

Most of the Indian Thermal Power plants are looking for getting imported coal

from countries like Indonesia, South Africa. These countries are having enough

coal reserves but recent regulations and governmental policies are coming as a

roadblock in the way. As per research done, new coal importing destinations like

Botswana, Mozambique should be a preferable thought.

African countries like Mozambique, Botswana are taking relevant regulatory

measures like COAL ROAD-MAP in order to promote the coal trade across their

nations giving positive and green signals for the Indian thermal power plants like

CLP.

Moreover for CLP, African countries like Mozambique and Botswana will be

quite a viable options as far as sea distance and days in transit concerned w.r.t the

ports on the western coast of India.

To secure coal supply on a long term perspective, CLP should look for acquiring

coal linkages in African countries unlike in countries like Indonesia where they

are putting restrictions of divesting a minimum of 50% stake with the domestic

companies.

97

6.3 LIMITATIONS OF REPORT

There can be some limitations of the research report that can come as a hindrance on the

securing the aforesaid target of securing fuel supply. These are:

A detailed cost analysis of the coal prices can be cited as a limitation because

landed cost of coal and various pricing heads affect the final price of coal.

African countries like Botswana, Mozambique are considered as under-

developed countries and thus the regulations as well policies are not clear.

Socio Economic and Political factors have not been discussed in detail in the

report which can affect coal imports from these countries.

African countries being smaller economies, their policies and regulations can be

influenced by big business houses.

Availability of big size coal carrying ships can also affect the coal trade.

Natural calamities like earthquake, floods etc can affect coal production in these

countries.

98

6.4 RESULTS AND DISCUSSION

Indian Thermal Power plants like CLP will not be able to fulfill their coal requirement

for adequate generation of electricity. Although FSA has come out as silver lining from

dark clouds but the situation is still critical. Keeping these things in mind, calculations

has been done as follows

Various possibilities of level of delivery for coal has been taken and thereby the

annual compensation analysis for Indian thermal power plants like CLP is put

forward. It has come to notice that in spite of facing shortfall of coal to CLP, CIL

has to bear a negligible amount of compensation as shown in Annexure 1.

Per unit fuel cost is the major indicator of performance of any power plant. As

CLP will be facing coal shortage from its own linkages, so in order to fulfill the

coal requirement, there are 3 options which can be looked by Indian thermal

power plants like Coal from E-Auction, Coal from open market and Coal from

various coal exporting countries. Various percentages of coal mix has been taken

(As shown in Annexure -2). Thus after calculating the landed cost of the coal to

the thermal power plants, per unit fuel cost has been put forward. From the

calculations it is quite clear that if Indian thermal power plants will look for more

imported coal, this will ultimately led to increase in the fuel cost.

99

6.5 FUTURE SCOPE OF PROJECT

As per analysis, Coal will be the main stay of energy for India for the next to 15-20

years. So securing the coal supply is the most crucial factor at this point of time. If one

thinks on a long term scenario, this project has a wider scope of fulfilling the fuel

shortage especially coal for any Indian Thermal Power Plant. This project can be further

used to do a detailed analysis for various countries of the world having sufficient amount

of coal reserves.

Moreover this report can be extended in studying the effect of coal import on the

company’s financial condition and thereby making it more competitive in the current

power sector scenario.

100

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102

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103

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104

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105

ANNEXURES

ANNEXURE-1

ACQ Quantity Delieverd Quantity (%)Delivered

Quantity(DQ)DDQ(in %)

Deemed

Delivered

Quantity(DDQ)

Force Majeure(FM) RF(%)

Qty. of Coal not

supplied by sellers to

Railways(RF)

Level of Lifting(LL)Level of

Delivery(LD)

5210000 60% 3126000 5% 260500 142739.726 2% 104200 95% 69.73972603

5210000 58% 3021800 6% 312600 157013.6986 4% 208400 94% 71.01369863

5210000 57% 2969700 7% 364700 171287.6712 6% 312600 93% 73.28767123

5210000 55% 2865500 8% 416800 185561.6438 8% 416800 92% 74.56164384

5210000 53% 2761300 9% 468900 199835.6164 10% 521000 91% 75.83561644

5210000 52% 2709200 10% 521000 214109.589 12% 625200 90% 78.10958904

5210000 50% 2605000 12% 625200 228383.5616 14% 729400 88% 80.38356164

5210000 47% 2448700 15% 781500 242657.5342 16% 833600 85% 82.65753425

5210000 45% 2344500 17% 885700 256931.5068 18% 937800 83% 84.93150685

5210000 40% 2084000 20% 1042000 271205.4795 20% 1042000 80% 85.20547945

Level Of Delivery & Level Of Lifting Calculation

Sr. No

Simple Average

Price of

Coal(P)/MT

Level of Delivery(LD) Level of Lifting(LL) Fixed Annual Contracted Cap.(ACQ) Deemed Delivered Quantity(DDQ)

Annual

Compensatio

n

Annual

Compensatio

n

1 1533.333333 69.73972603 95% 5210000 260500 81965.90868 81965.90868

2 1533.333333 71.01369863 94% 5210000 312600 71788.56619 71788.56619

3 1533.333333 73.28767123 93% 5210000 364700 53622.55707 53622.55707

4 1533.333333 74.56164384 92% 5210000 416800 43445.2146 43445.2146

5 1533.333333 75.83561644 91% 5210000 468900 33267.87214 33267.87214

6 1533.333333 78.10958904 90% 5210000 521000 15101.86301 15101.86301

7 1533.333333 80.38356164 88% 5210000 625200 -3064.146118 0

8 1533.333333 82.65753425 85% 5210000 781500 -21230.15525 0

9 1533.333333 84.93150685 83% 5210000 885700 -39396.16437 0

10 1533.333333 85.20547945 80% 5210000 1042000 -41584.84017 0

COMPENSATION Calculation

106

ANNEXURE-2

GCV of

Coal

from

CCL(Kcal/

Kg)

Landed Cost

of Coal from

CCL

Quantity(%)Landed

Cost

GCV(Kcal

/Kg)

Landed

Cost

GCV(Kcal

/Kg)

Landed

Cost

GCV(Kcal

/Kg)

Landed

Cost

GCV(Kcal/

Kg)

3800 3232 10% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 11% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 12% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 13% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 14% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 15% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 13% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 15% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 19% 6565 3800 6350 3800 6230 3800 6240 3800 6346.25 3800

3800 3232 20% 6565 3780 6350 3800 6230 3800 6240 3800 6346.25 3795

Coal from Open Market

Average

Landed

Cost

Average

GCV

(Kcal/Kg)

SECLWCL CCL_I MCL

Quantity(%) Landed CostGCV(app)(Kca

l/Kg)Landed Cost

GCV(app)(Kca

l/Kg)

Landed Cost

of LoW Grade

Coal

GCV of Low

Grade Coal

GCV of Imported

Coal after

Blending

10% 8400 5500 8600 5600 2700 3000 8500 5550 3510

8% 8400 5500 8600 5600 2700 3000 8500 5550 3510

7% 8400 5500 8600 5600 2700 3000 8500 5550 3510

6% 8400 5500 8600 5600 2700 3000 8500 5550 3510

5% 8400 5500 8600 5600 2700 3000 8500 5550 3510

12% 8400 5500 8600 5600 2700 3000 8500 5550 3510

13% 8400 5500 8600 5600 2700 3000 8500 5550 3510

15% 8400 5500 8600 5600 2700 3000 8500 5550 3510

8% 8400 5500 8600 5600 2700 3000 8500 5550 3510

6% 8400 5500 8600 5600 2700 3000 8500 5550 3510

Imported Coal from Foreign Land

South Africa Indonesia

Average

Landed Cost

Average

GCV(Kcal/Kg

)

Low Quality Coal for

Blending

107

Average GCV (Kcal/Kg) Average Cost PER GCV Coal Cost Per Unit Fuel Cost

3771 4336.4 1.15 2.76

3776.8 4427.2 1.17 2.81

3779.7 4404.6 1.17 2.79

3782.6 4520.4 1.20 2.86

3785.5 4497.8 1.19 2.85

3765.2 4841.28 1.29 3.08

3762.3 4473.96 1.19 2.85

3756.5 4888.6 1.30 3.12

3776.8 4723.2 1.25 3.00

3781.4 4260.4 1.13 2.70

Quantity(

%)Landed Cost

GCV(Kcal

/Kg)Landed Cost

GCV(Kca

l/Kg)

Landed

Cost

GCV(Kcal/

Kg)

Landed

Cost

GCV(Kcal

/Kg)

10% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

16% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

16% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

21% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

21% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

19% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

6% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

15% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

18% 6200 3800 6000 3800 5900 3800 5900 3800 6000 3800

4% 6200 3780 6000 3800 5900 3800 5900 3800 6000 3795

Coal from E -Auction

WCL CCL_I MCL SECLAverage

Landed

Cost

Average

GCV

(Kcal/Kg)

108