Gupta Coal vying to regain coal import share

September 16, 2009: The Nagpur-based Gupta Group has interest in coal, infrastructure, power, mining and logistics with its investment arm Gupta Corporation Ltd; and other operating companies like Gupta Coal (India) Ltd, Gupta Coalfields & Washeries Ltd, Gupta Energy Private Ltd, PT Gupta Coal International and Gupta Infrastructures Pvt Ltd.

Through its operating company, Gupta Coal (India) Ltd is in the business of supplying imported coal from Indonesia, South Africa and Australia through its well established ports and networks at leading Indian ports with necessary infrastructure and expertise to store and sell imported coal.

Gupta Group had started coal imports way back in 1999, but it diverted its focus to other activities in between after a few years in coal import business and could not concentrate on it.

However, coal import is now back on the group's agenda and it is trying to increase its market share by providing all in one service to its customers and has already set up offices and storage facilities at almost all the leading ports in the country.

It is quite confident of achieving the numbers set by it for the current financial year as well as in future with a focus on providing right quantity of coal at right price and at right time to its customs.

In a telephonic interview to Coal Insights, senior vice president (sales) of the Gupta Coal (India) Ltd, Mohan Kumar, spoke about the company's agenda going forward and the company's views on imported coal scenario in the country.

Excerpts:

Coal importers are playing an important role in securing India's energy security. How is Gupta Coal gearing up to meet the future challenges?

Gupta Coal is not only into coal mining, but in coal washery and in the business of coal import as well. We have an offtake arrangement with an Indonesian mining company from where we expect to get about 2.5 million tons of coal annually in the coming days.

The stake is through PT Gupta International Ltd and the mine has an exploration area spread over 2000 hectares. We have already started getting 50,000 tons of coal monthly from that mine in Indonesia and supplying to customers in India.

Plus, we have joined hands with Star Petro Energy LLC (an ETA Group Company) for arrangement to lift coal from South African coal mine which is owned by Osho Group. We are now concentrating on importing coal from South Africa, which will be about 1 million tons per annum.

In addition, we have been allotted a captive coal block at Nerad Malegao in Maharashtra, which has a reserve of about 14 million tons. We plan to set up a power plant with initial capacity of 120 MW (2 X60 MW), which will first increased to 240 MW and then to 600 MW.

We also have a joint venture agreement with Maharashtra State Mining Corporation Ltd for mining in a block, which has an estimated reserve of 73 mt. We are fairly confident that with our exploration and mining activities, plus initiative in coal imports will take care of the need of the nation in coming years.

How is your company gearing to face competition as a number of coal importers are now vying for a share in the Indian market?

Competition will give us the opportunity to improve our performance. We believe in supply of right quality of coal in the right quantity at the right price to right consumers. With this motto, we have been able to get long-term contracts with south India based cement plants as we are supplying to them on a regular basis for almost one year now and we are their preferred choice.

We are not afraid of competition because we believe that our strength lies in our set of customers and we are also trying to expand our business. Everyday we are looking at opportunities - whether it is a cement company or a sponge iron company or paper or sugar industry. The spectrum is quite wide and there is enough space and opportunity for everybody to work in the market.

There is a feeling in certain quarters that private coal suppliers are harming the interest of the country in some way. How would you respond to this?

Price is not the only criterion for getting imported coal. Power, or for that matter cement or sponge iron companies, have to concentrate on production and distribution. It will be very difficult for them to visit various countries and try to find out which coal to purchase and from whom and at what price and with whom to enter into long-term contracts because they do not know the people in overseas countries.

Traders like us have all this knowledge beforehand so if they use our services by paying some extra cost, they are saving huge money and time which can be otherwise spent on other constructive work.

So in a way, traders like us are helping the country by helping the consumer companies save their money and time. In turn we are also helping the country in terms of securing imported coal for our domestic users at a good price.

How much coal on an average did your company import in 2008-09?

In 2008-09, we imported close to 1 million tons of thermal coal. The entire quantity was supplied to private sector companies in cement and sponge iron sectors in equal proportion.

Though the requirement of the cement sector for imported coal will be much higher, we could not tap the opportunity to the fullest because we were not in a position to understand the market totally. That is because we were more into stock and sale operation till very recently.

How much coal have you imported in the first quarter of the current financial year? What is your expectation for the current financial year?

We have already done about 1 million tons till June and going by the current trend, we should be able to end the year at slightly over 2 million tons of South African, Indonesian and some consignments of Australian thermal coal. But most of the import will be from South Africa and Indonesia.

What would be the strategy of Gupta Coal to become the most preferred supplier of imported coal to Indian consumers?

Gupta Coal's strategy has always been to supply the right quantity of coal at the right price and at the right time, and we will continue with this simple strategy.

What are the technical problems you face in importing and then supplying the coal to consumers?

Contracting right tonnage at right price in the international market is a major issue and then there is a problem of port facilities and rake availability after the arrival of import consignment. We need a mechanism for faster movement of vessels and more area for storage of coal at various ports.

Going forward, where do you see India's demand for imported thermal coal in the next five years?

It may not be to the extent of 100 million tons in the next few years, but yes, I expect Indian demand for imported coal, on a moderate scale, to grow by at least 50 to 60 percent in the next three to four years. However, it may be slightly higher if all the announced power projects come on stream as per schedule.

Demand for Indonesian coal will also be there because for Indian companies it is convenient to bring in coal from that country and it is more ideally suited for Indian power plants. There is also a freight rate advantage compared with Australia and South Africa.

Vietnam could also be an option, but I haven't heard big quantities coming to India from that country. The country is thus not in our focus right now.

Do you think any change in government policy is required to streamline coal imports?

I do not think any major policies are required. Coal is already under open general license and everbody is free to import as much he wants. There is no restriction on import of coal and if demand keeps on increasing, consumers are free to import.

PSU companies like NTPC and SEBs generally buy imported thermal coal through the limited tender route. Do you think this is a proper process?

I think they should start buying through the open tender route to attract competition and attractive quotes.

This will help them reduce their cost of import. They should also allow foreign companies to participate in those open tenders as this may significantly reduce their cost of purchase. Right now foreign companies can participate in government tenders only through their Indian partners, which I think should be avoided.

How do you see the overall market scenario in the coming years?

The demand for imported coal in India is likely to grow phenomenally in the next four to five years and the focus should be on securing supplies as resources are limited even in other major coal producing countries.

Source: Coal Insights