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Interview: Devendra Arolkar, GM & Head - Fuel Sourcing, Larsen & Toubro

Devendra Arolkar discusses his top tips for international producers selling coal into India and rising electricity demand. Plus, Devendra tells us what he is most looking forward to hearing about at Coaltrans India.





Indian coal buyers are currently spoiled for choice with increasing domestic production and coal producers across the world looking to sell into the country. As a buyer of coal, how does this affect you? Is it good to have a wider choice or does it create problems for you?

Increased domestic production: While the increase has been 7% in FY April’14 - Mar’15 and growing at a healthy rate of a 9 % increase for the current year, it may be noted that this increased on the back of stagnating production for the period FY 2009-10 to FY 2013-14 wherein the increase ranged from 0% to 3.65. It implies that part of this increase could be attributed to accumulated slack in the system. We have to wait and watch if this can be sustained for a considerable period to give requisite comfort. Even if (and a big if) the domestic production continues to grow at the current rate, one must not forget that evacuation is a major bottleneck. Assurances are being given on DFC, the three coal evacuation corridors (in SECL, CCL and MCL command areas) which are in the works for long. We also keep hearing about CIL procuring rolling stock, Railways increasing carrying capacity of wagons and so on. The domestic coal scenario is not as rosy as it is made out to be.

Yes, on imported coal, India appears to be the only major destination for international coal, more so in view of sentiment for coal being negative and developed countries affording to move away from this “dirty” fuel. For buyers of coal for plants located away from coalfields, this softening of international coal prices is certainly a benefit.



What would be your top tips for an international producer wanting to sell coal into India?

Indian Gencos suffer from high variability of demand, somewhat exacerbated by no obligation to supply by DISCOMs and creaky distribution network. One way to cater to this variable demand would be to create a reliable and credible stockpile/depot so that demand can be aggregated and catered to. Currently, lots of Traders stock at ports and try to cater to this demand, however they suffer from the disadvantages of poor control of quality at the Port, uneconomical port charges, and disaggregated demand etc.

Another aspect that must be considered is that most coal imported into India is blended with domestic coal. While NTPC carries out various studies for its own use, other players do not get access to the results. Big suppliers can participate in joint studies and help in determining blending ratio as well as standardisation of imported coal.

The miners / large global suppliers could get power plants interested in long term agreements linked to indices without the onus of Take or Pay obligations. Further, assurance of consistent quality of coal from a known mine could be an incentive for power plant performance. It may be noted that more than 30% generation capacity is in private sector, which can be targeted.



Electricity demand continues to rise in India. How is Larsen & Toubro keeping up with this demand?

Considering that India’s GDP is expected to grow at a rate of more than 7%, even at demand elasticity of 0.9, we should see commensurate growth in electricity generation. Add to this the large population, some 400 million by one estimate that does not have access to electricity, we should see healthy growth in electricity generation. Surely, part of this will be met by renewables but as forecasted, coal will remain mainstay until approximately 2035.



At the 15th Coaltrans India in March, you will be appearing on the panel discussing the future of coal imports. How do you see this situation developing in the next 1-2 years?

In view of domestic coal availability being constrained as brought out above, coastal plants as well as non-pithead plants will burn imported coal in good measure. Considering that the international prices are likely to remain depressed and Coal India prices will have upward pressures (including Railway freight), the imported coal would continue to be competitive. The only factor could be weakening of rupee against dollar.

In the case of India, it has to be understood in the context of burning firewood and living without electricity vs cheaper electricity from relatively cleaner fuel like coal. Thus demand for imported coal will continue to be robust in the near future.



Which other topics are you most looking forward to hearing discussed at Coaltrans India?

Considering that transportation cost forms a large part of landed cost, technologies for reduction in ash or moisture content (beyond conventional washing) should figure prominently. Also, some topics covering blending of coal for firing in the plant would be useful. A brief overview of the do and don’ts of contracting for imported coal could add value. Further, in view of recent Paris agreements, some possible measures to counteract the pressures may be covered.

 

You can hear more from Devendra at the 15th Coaltrans India on 2-4 March in Goa, where he will be participating in a thermal coal buyers panel discussion on the future of coal imports into India.

This content is provided by Coaltrans Conferences for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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