Jindal Steel and Power (JSPL) on Friday said its decision to contest the change of end-use of three mines previously held by the company was not only due to the possible cost escalation from having to rely on a distant mine but also because foregoing the three mines would jeopardise its new first-of-its-kind coal gasification plant (CGP) meant to cut cost by as much as 20% at its Angul-based 2 million tonne capacity steel plant.
The Delhi High Court on Wednesday asked the government to review change of end use for three mines — Gare Palma IV/6, Utkal B1 and Utkal B2 — previously held by Jindal Steel and Power (JSPL), prompting the government to withdraw these schedule III blocks (about to start production) from the auction process and refer them to the technical committee that decides on the end use.
Most of the steel plant in the country use high-grade coking coal that is primarily imported. The low-grade coal is used by steel plants for running captive power plant. JSPL, however, installed a CGP plant at a cost of R3,000 crore with the purpose of using low-grade indigenous coal from Utkal B1 and Utkal B2 mines to generate gas from the plan which would be used as a substitute for the expensive coking coal in producing steel.
“Blast furnace route of making steel used high-grade coking coal which is mostly imported in India. We took a decision that we don’t want to eliminate use of coking coal and use local coal instead,” Ravi Uppal, managing director and CEO, JSPL told FE.
The mines near the Angul steel plant are crucial to cost cutting because of its proximity to the steel plant. A mine farther away would not only escalate transportation cost but also render the CGP substantially ineffective.
“The technology is very sensitive to the proximity of the mine. Any long distance transportation could be detrimental to the quality of output of the coal gasification plant,” Jona Pillai, ED, coal gasification, JSPL, said.
Additionally, commenting on the Delhi High Court verdict on the change of end-use, the company said that the decision to change end-use of coal mines by the government appointed technical committee lacked consistency and smacked of high handedness.
“The extractable reserved of Utkal B1 is only 70 million tonne, But they have (technical committee) clubbed this with Utkal B2 to ensure that combined reserve goes beyond 100 million tonne in order to isolate the mines for power use as per the criteria developed by the government-appointed technical committee. There are however many other mines with less than 100 MT of extractable reserves that have been reserved for power,” Uppal added.