The regulatory environment in India for both coal and iron ore is somewhat difficult today as the government attempts to decide how key resources should be allocated. Companies like the R18,209-crore Jindal Steel and Power, are securing resources for the future, having snapped up mines in Australia, Oman, Mozambique, Botswana and applied for iron ore mines back home. Ravi Uppal, managing director and CEO, says the firm is actively bidding for power purchase agreements (PPA) and has signed some short-term PPAs. JSPL is keeping his eyes open for assets and will buy at a reasonable price. Uppal, who took charge at the firm three months back, tells Rishi Raj and Shobhana Subramanian the firm will participate in auctions for coal blocks. Edited excerpts:
Have you received the licence for the Utkal B1 coal block project in Orissa?
We have completed all the formalities and have received the environment and forest clearances. We are waiting for an execution licence from the state government (Orissa), which basically is the formal nod to commence production.
This coal block is important for us because this will supply coal to the 6 million tonne Angul steel plant. We hope to commission the coal gasification plant, the largest such plant of 225,000 per cubic metre to produce syn gas, and then the steel plant by May-June this year. The steel plate mill has already been commissioned and the steel melting shop, which basically uses the electric arc furnace route, would be commissioned soon. All the captive power units will be up and running by March, and the capacity is 800 MW.
Is JSPL bidding for captive iron ore mines?
Since we are making fairly large investments in Orissa, we have requested the state government to allocate captive iron ore mines and are hopeful of an allocation.
The Orissa state government has put in place a rule that requires at least 50% of the ore to be used for captive units in the state. That would limit our flexibility since we would like to have a pan Indian presence.
By December 2013 our capacity will have increased to 7.5 mt and subsequently go up to 11.5 mt by the time phase?II of Angul gets commissioned. We are also setting up a 3 mt steel project at Patratu in Jharkhand, so by 2015-16 our total capacity would go up to 14.5 mt.
JSPL has assets in Oman, you have mine across Australia and Africa. Are you still scouting for assets and would you consider buying a finished steel plant overseas?
We are looking for resources overseas to feed out plants back home and prices of assets today have softened compared with those pre-2008. As far as a steel plant is concerned it would depend on what is on offer and what the price is.
It would make sense only if there is scope to integrate the business with our business back home. But one thing is clear ? we will not venture into anything without first putting up supplies of resources required to make the finished product. We will participate in the auctions for coal mines.
How many power purchase agreements have you been able to sign with the state electricity boards?
Currently, we produce 2,500 MW of power, which would go up to 5,000 MW by 2014. We have signed some short-term PPAs, but so far we have not been able to sign any long-term PPAs. We are participating in bids and did so in Uttar Pradesh, too, bidding at roughly R5-5.30 per unit, but we did not emerge the lowest bidder.
The larger point is that the power sector scenario is grim and there?s urgent need for reforms of SEBs, where apart from Gujarat SEB all others are making heavy losses. The problem is that banks are no longer ready to lend them. There?s also the issue of coal prices, which have been hiked by the Coal India by almost 30% in the last 12 months as they have started using international prices as a reference point. Since Indian coal has high ash content, it is hard to understand why prices are being benchmarked to international levels.
What is your outlook on prices of merchant power?
State governments today prefer load shedding to buying expensive power and then incurring losses. The bidding for UP shows that the price of power is trending up. Demand for merchant power is cyclical. Also post the July grid collapse, some of the feeders have been de-rated so some plants can?t evacuate enough power.
