Wild fluctuation in the rupee for the last one-and-a-half years and repeated downgrades of the sovereign credit rating have had their fallout on Coal India Ltd’s (CIL) procurement policies. The world’s largest coal miner, which is gearing up to offer multi-billion dollar contracts for mine development and operation (MDO) as well as equipment purchase in 2013-14, is now redrafting its tender documents to allow bidding in the US dollar, according to sources.
The demand for dollar bidding has come from prospective bidders during recent rounds of pre-bid meetings. As most of the mining contracts are long-term in nature, global players are unwilling to share the downside risk of currency fluctuation.
“In a competitive environment, where we have limited space to earn profits, it is extremely risky to agree to payments in rupee terms in contracts lasting over 11 or 12 years. A devaluation in the rupee and we may end up in the red,” a global opencast equipment supplier said . CIL is apparently agreeable to the demand.
“Ideally, contractors should take the performance risk while we should share the risk of volatility in Indian currency,” a CIL official told
“We will allow interested parties to bid fully in dollar terms for the MDO contracts,” the CIL official said.
The company will allow bidders to claim payment in dollars for the 11-year maintenance and repair contract . The face value of the equipment, however, will be paid in rupee terms.