The government’s coal linkage auction has been received well by India Inc. Tata Sponge Iron, which imports a bulk of its coal, participated in the recent auction to secure a domestic supply source.

Speaking to Bloomberg TV India , Tata Sponge Iron MD Digambar Pandurang Deshpande says the company has won a coal linkage of 24,000 tonnes per annum for the next five years from one of the coal mines in Eastern Coalfields Ltd (ECL). The subsidiary of Tata Steel is now operating near full capacity, he said.

Regarding the allocation of coal linkage from Coal India, can you take us through the modalities of this auction? What is the quantum of the linkage? How much of your demand will it meet?

We have been allotted 24,000 tonnes of coal per annum for the next five years from one of the coal mines in ECL. We are yet to receive the allotment letter. The process of auctioning is very clear.

Once we successfully participate in the process, it is as good as getting the auction. It will not meet 100 per cent of our coal requiremen as it is in excess of 3,00,000 tonnes. Our strategy is to sort of de-risk and expand the supply chain for the coal at our power plant.

So, it is less than 10 per cent of our total requirement. But we have an alternative supplier chain being constructed.

What is the price difference between the coal you import and the domestic notified price? Is imported coal much more attractive and cheaper?

The auctioned coal is more expensive than the imported coal.

That’s why we couldn’t fully lock the domestic coal. But it is necessary for us to not depend only on a single source of coal.

If we adjust for the higher grade, what’s the price differential now between the coal which you were getting through linkage and the coal you are importing?

Under current prices and foreign exchange rates, it may add up to ₹600-800 per tonne of coal.

Two quarters back, there was a shutdown which led to a fall in capacity utilisation. Has capacity utilisation gone up? What is the current capacity utilisation of the three kilns?

We are near complete capacity utilisation now. We are running at the same rate as we were in the previous two quarters.

Do you have any capex plan for FY17?

There is no decided capex programme as of now. We are looking for one. But nothing has been decided.

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