Coal blocks with washeries could be open for bidding by steel firms

The government intends to introduce a new policy in which coking coal blocks will be offered to steel companies along with washery operations. According to the government, this move will enable steelmakers to access domestic fuel for their operations, which currently rely heavily on imported coking coal. It is estimated that the steel sector requires more than 60 million tonnes (mt) of coking coal, with 90% of the demand being met through imports. Under the new policy, steel firms will have the opportunity to bid for coking coal blocks and increase the use of domestic coal blending in blast furnaces by 25-35% through washed coal obtained from their washeries. An official, speaking anonymously, stated, The policy will modify auction parameters, reserving specific coal blocks with attached washeries exclusively for steel companies. The auction parameters will be based on the coal price quoted by the bidders and the investment required to revive closed washeries of state-owned coal-producing companies. The official mentioned that several steel companies have already expressed interest in participating in the upcoming auction plan, and the process will commence once the necessary approvals are obtained from the government. It is expected that the initial auctions will involve four coal washeries and blocks, with the potential for expansion depending on the success of the scheme. The four existing washeries slated for auction are in a dilapidated state, and the winning bidders will be responsible for renovating them at their own expense after acquisition. Queries sent to the spokesperson for the Ministry of Coal have not received a response. Previously, while sectoral auctions for coal blocks were permitted, the focus has now shifted to exclusively conducting commercial coal mining auctions. This represents a departure from the previous system that imposed restrictions on sectors, usage, and pricing. Presently, there are no such limitations in place. However, the new policy will only affect the steel sector, which specifically requires hard coking coal. Ritabrata Ghosh, Vice President of Corporate Ratings and Industry Research at Icra, stated, Prime hard coking coal is suitable for the steel industry, but India predominantly produces soft and semi-soft variants that require washing. Washeries play a crucial role in the utilisation of local coking coal by the steel industry. He further noted that India currently possesses a coal washing capacity of 23-25 mt, a number that the government plans to increase to approximately 55 mt by 2030. In the fiscal year 2022, the government aims to raise domestic coking coal production to 140 mt by 2030, building upon the production of approximately 55 mt. This emphasis on increasing local coking coal production stems from the high dependence on fuel imports. According to a recent report by Mjunction, a business-to-business services provider, India's overall coal imports (both coking and thermal coal) increased by 30% to 162.46 mt in FY23. The import of coking coal in FY23 saw a 5.44% rise to 54.46 mt compared to 51.65 mt in FY22. The majority of these imports originated from Australia, with smaller quantities sourced from South Africa, Canada, and the US. Also read: THDC India commences commercial operations at MP's Amelia coal blockImported coal plants urged to operate fully until September