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  • Coal India faces 10 mt production loss as agitation continues

    Coal India(CIL) faces a production loss of 10 million tonnes of coal in the current financial year as 122 of its employees sacked for indiscipline in Odisha are persisting with their agitation, threatening the closure of some crucial mines. The agitation, said to have political support, hasn't ended despite the company's offer on Monday to reinstate the employees sacked in May for indiscipline. The terminated employees have threatened to go on indefinite protest starting July 25.The workers were sacked for not vacating land in lieu of which they had been given jobs in Mahanadi Coalfields Ltd (MCL), a subsidiary that contributes about a quarter of Coal India's production. "Despite having agreed to disburse more than in hand, Mahanadi Coalfields Ltd (MCL) feels helpless with villagers of Hensmul at Talcher coalfields in Angul district of Odisha threatening to go on indefinite dharna at its two mega projects - Bhubaneswari and Ananta -- from July 25," an official statement said.Delays in shifting the villagers may result in a loss of around 10 million tonnes of coal in the current financial year from the Bhubaneswari opencast mine, which may result in a loss of about Rs 100 crore in royalty to Odisha, it said. MCL announced a recall of the employees late on Monday as a "goodwill gesture". Officials in the coal ministry said the company was under pressure from local politicians and trade unions to take back the employees and end the agitation that was impacting production.But the workers are now demanding alternate plots before vacating the land they occupy, which could take at least six months according to MCL. While reinstating the employees, the company has exempted them from submitting affidavits stating that they would vacate the land by October 31. The affidavits had been a pre-condition for reinstating the employees as agreed during tripartite meetings involving MCL management, employees and the district administration. Acoal ministry official said a written agreement from workers was required to prevent them from backtracking. The employees were recruited at the Talcher coalfield between 1995 and 2009 and as per the terms of appointment they were supposed to vacate their land within five months of joining the company. 

  • Margin squeeze for galvanised steel makers
    The gradual rise in global zinc prices is expected to squeeze the operating margins of galvanised steel producers, due to their inability to pass on the increased cost of production to consumers. Zinc is resistant to rust. So, it is used to coat steel for making lamp posts, car doors and beams. It is combined with copper to make brass. Two-thirds of its use is as an input for galvanising steel.Zinc prices have moved up 21 per cent since April, on reports of the closure of mines. Spot zinc on the benchmark London Metal Exchange (LME) settled at $2,375 a tonne on Thursday, from $1,962 a tonne on April 1. Galvanised steel producers in India face a double problem. Lower demand from the infrastructure sector, the largest consumer of galvanised steel, has dampened overall business sentiment in this segment. Exports would also be hit, with global oversupply. “Therefore, our operating margins would remain under pressure,” said Ankit Miglani, deputy managing director of Uttam Galva Steels, the country’s largest galvanised steel producer.“Zinc prices are trending higher, as supply is expected to move into a deficit due to closure of large mines, including Century and Lisheen in the next two years. Also, aiding a higher price is increasing cost of production due to increasing mine depths, difficult geography and stringent environmental regulations,” said Pavan Kaushik, Hindustan Zinc spokesperson.Adding: The imminent mine supply gap is structural, with no major new mine expected to come online in the near-term. There is a requirement of about two million tonnes per annum of new capacity by the end of this decade but financing of new mine projects remains a big question mark. Therefore, a secular uptrend in zinc prices is likely in future, benefiting zinc producers like Hindustan Zinc.”Mining companies are shutting key output facilities in Canada and Australia because reserves in those mines have largely been depleted.  New mining projects for zinc aren’t as large as those that recently closed.“Just like we saw in nickel earlier in the year, commodity speculators have latched on to another base metal bull story, centered around the perception of emerging global deficits due to supply-side problems and an undercurrent of robust demand. In zinc’s case, LME stocks have been falling consistently for a long time but the closure of some major mines over the next year to 18 months is creating the perception that the market will tighten a lot further, extending the upside for prices, in theory,” said Andrew Cole, senior analyst at London-based Metal Bulletin Research.

  • CBI and CVC locked in coal war
    It's all in black and white, and it's not going to blow over anytime soon.The ongoing coal scam investigation has exposed deep differences in the direction the Central Bureau of Investigation (CBI) and the Central Vigilance Commission (CVC) think the law should take.With the CBI deciding to take on the CVC, things could begin to turn ugly from Friday as the two agencies battle it out in the Supreme Court, which is monitoring the probe.In focus are 14 companies that are involved in the allocation of 64 coal blocks. The CBI thinks no case is made out; the CVC is adamantly opposed to closing these files.In a big setback to CBI Director Ranjit Sinha, the Supreme Court has asked the CVC to look into cases that the investigating agency wants to close.After scrutinising the cases, the anti-corruption watchdog rejected the CBI view that Preliminary Enquiries into the allocation of 64 blocks be closed, setting the stage for a head-on collision.The CVC recommended that the CBI must register cases against 14 companies, but the agency does not want to budge and is ready to challenge the CVC.Incidentally, the CVC is mandated to enjoy a supervisory role over the CBI.With the CBI challenging the CVC, the stage is set for a face-off between the two organisations.The CBI can't be too happy, for the CVC's recommendation on the cases came at the insistence of the Supreme Court, which has described the CBI's closure reports in these cases as "unacceptable". The court wants FIRs against all 14 companies.

  • Ministry readies road map to phase out e auctions by CIL
    The coal ministry has prepared a road map for phasing out of the lucrative e-auction route for Coal India (CIL), a move that is likely to adversely impact the company's bottomline and its valuation ahead of a proposed stake sale.Sources said that CIL has already been directed to reduce quantity of e-auction coal to a mere 26 million tonne in 2014-15, a fall of over 55% from 58 mt it sold under the route last year. The company may need to keep the e-auction of coal at 5% of its total production in subsequent years. Depending on the fuel availability situation, the company could be told to further reduce this quantity with possibility of completing eliminating e-auction of coal once domestic prices are aligned with international prices.“The intention is that fuel needs of maximum number of power projects are met first before any other route is explored to sell coal,” said an official.The situation on fuel availability for power projects has already reached critical stage this year. Of the 100 coal-based power plants monitored by Central Electricity Authority (CEA), about 44 plants are currently having critical coal stock of less than seven days, of which 25 power plants are having super critical coal stock of less than four days requirement.The decision (to reduce CIL e-auction) could result in loss of earnings to the tune of R2,000 crore for CIL in 2014-15.Depending on the decisions taken in subsequent years, the earnings could see a further fall. Already CIL’s financials are under stress with the company’s witnessing a drop in the last fiscal profit, the first such fall since the global financial crisis of 2008-09.The move is expected to affect government’s disinvestment programme as a 10% divestment of the government equity in the company is expected to fetch close to R24,000 crore or more than one-third of R63,425 crore pegged from the disinvestment proceeds in this years Budget. With expectation of falling profitability, the company’s valuations can take a hit impacting the share sale issue.CIL sold close to 58 million tonnes of coal, or 12.5% of its total production of 462 million tonnes, through spot e-auctions in 2013-14.This helped the company earn revenues to the tune of about R13,000 crore. If the fuel was sold at notified prices, the earnings from the same amount of coal would have been lower by R4,000 crore

  • CBI quizzes former Odisha official in the coal block scam
    The Central Bureau of Investigation has examined a former top bureaucrat of the Naveen Patnaik government in the coal block allocation scam, asking him why the Odisha chief minister wrote to then Prime Minister Manmohan Singh in 2005 pitching for a coal block to be allotted to Hindalco Industries.Retired IAS officer Bhaskar Chatterjee was questioned recently, the agency confirmed to ET. The CBI has apparently got the clarifications it needed from the officer and now may not require questioning of the chief minister, a senior officer said. This would be a relief to the BJP-led Central government, which needs Patnaik's support in the Rajya Sabha where the ruling alliance doesn't have a majority. Chatterjee was examined as a witness, the official said. Chatterjee could not be contacted for comment. He also didn't respond to an email. Chatterjee was the principal secretary for steel and mines in the state in 2005 when Patnaik wrote to Singh, which resulted in the government reversing its earlier decision to not allot a coal mine to the Aditya Birla Group company. This decision is now at the heart of an ongoing criminal probe against HindalcoBSE -2.20 % and the aluminium maker's chairman, Kumar Mangalam Birla.

    With at least eight major thermal power plants belonging to National Thermal Power Corporation of India (NTPC) across the country left with less than a week’s stock of coal, the Government has planned to phase out e-auction of coal to ensure smooth supply of dry fuels to power plants. Coal India Ltd (CIL), which sells around 10 per cent of coal through e-auction, has been directed by the Coal Ministry to divert this quota to thermal power plants.
    Highly placed sources told The Pioneer that the sale of coal by CIL through e-auction will be phased out. Under this plan, the quota of coal to be e-auctioned in this financial year will be cut by half to 26 million tonnes. CIL sells around 52 million tonnes of coal through e-auction.“E-auction will be phased out, but at the same time we will ensure that CIL’s profitability is not impacted,” a source told this correspondent.As on July 20, 2014, two thermal power plants of NTPC, namely Talcher and Kahalgaon, are in a critical state. They are left with six days of fuel. Another six NTPC plants have less than four days of coal stock.These are Dadri (four days), Rihand (one day), Singrauli (two days), Sipat (two days), Vindhyachal and Simhadri (one day each).On July 14, NTPC had written to the Power Ministry informing that six of its plants with a combined capacity of 16,840 MW or 15 per cent of India’s total energy capacity from coal-fired plants had stocks of up to two days and cannot weather even a “small” disruption in supplies.CIL, which accounts for around 80 per cent of the country’s total supply of the dry fuel, sells around 10 per cent of its yield through e-auction, mainly to smaller customers as power generation companies don’t bid aggressively owing to tariff caps.With 60 per cent of India’s installed generation capacity using coal, its shortage has hit thermal plants across the country hard, and therefore the Coal Ministry has directed CIL to increase production from its existing mines and reduce the quantity offered in e-auction.

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  • Lokesh Kuldeer, Esueno Technologies

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