Coal India Limited is looking to partner another state owned company Shipping Corporation of India Limited to form JV to import coal to control costs as overseas purchases of the fuel are set to surge.
The venture is expected to be on the lines of the company that CIL has planned with Steel Authority of India Limited for coal imports in which both firms plan to hold a 25% stake with the remaining held by other strategic partners.
Mr PS Bhattacharyya CMD of CIL said that “We have held initial talks with the Shipping Corporation and its CMD for a partnership and will make it formal when the time comes. We will create a benchmark and if we need more capacity, we will involve the private sector as well.”
CIL is keen to acquire equity in overseas coal blocks to bridge the gap between demand and supply of the fuel in the domestic market, even as coal production in the country continues to decelerate.
Mr Dipesh Dipu principal consultant with audit and consulting firm Price water house Coopers said that “Supply chain integration for coal sourcing from foreign assets makes business sense in light of the historical peaks in coal prices and shipping charter rates. Now, when the markets have slumped, it may present an opportunity to build capacities in logistics that may complement Coal India’s efforts of acquiring and mining coal assets abroad.”
He said that the move will also protect the company against volatility in the international prices of coal. Currently CIL imports around 29 million tonnes per annum of thermal coal, which is slated to increase to 40 million tonnes per annum shortly.
Mr Dipu said that “An alliance with the PSU shipping major may mean access to market intelligence and expertise for Coal India, on the one hand and may help SCI hedge risk of business cycles in international bulk trades, on the other.”
