Why Coal India Cancelled Its Maiden Tender For Short-Term Import Of Coal

Coal India Limited (CIL), the state-owned mining company has cancelled its maiden tender for short-term import of coal in which Adani Enterprises had emerged as the lowest bidder (L1 bidder).

Adani Enterprises had quoted around Rs 17,000-plus per tonne for supply of 2.416 Million Metric Tonnes (MMT) of coal, but CIL ultimately didn’t issue the contract’s letter of award (LoA) to Adani.

The CIL’s Board on 2 June had given a go-ahead for issuing global tenders to import coal on two counts. A short term tender was planned for the purpose of blending, and two medium-term tenders were planned to keep a certain quantity of coal on tap, so that the power sector doesn’t face any coal shortage during the monsoons.

Short-term tender

In a first, CIL on 8 May floated a global bid for supply of 2.416 MMT of imported coal “for destination” basis at various delivery points of various Power Generation Companies (GENCOs) and Independent Power Producers (IPPs).

The short-term tender was based on the indent received from seven state GENCOs and 19 IPPs and involved delivery of imported Coal by 30 September 2022. The tender was source agnostic - the coal could be sourced from any country.

Adani Enterprises Ltd emerged as the lowest bidder in the tender by quoting Rs 4,033 crore, followed by Mohit Minerals with Rs 4,182 crore bid, and Chettinad Logistics at Rs 4,222 crore.

Medium-Term tender

On 10 June, CIL floated two medium-term tenders for sourcing 3 million tonnes each of additional coal from overseas, in which, an Indonesian firm Bara Daya Energi emerged as the lowest bidder.

The firm, which submitted its bid through a consortium with an Ahmedabad-based company GHV India, outbid Adani Enterprises, the only other bidder for the two contracts.

Bara Daya Energi Consortium quoted Rs 4,331 crore and Rs 4,497 crore for the eastern and western coast tenders, respectively, against an estimated tender value of Rs 10,000 crore.

The two medium term tenders for 6 MMT have an option of increasing the bid quantity by 100 per cent to 12 MMT. It is an advance action aimed at securing domestic fuel supplies amid the fear of shortage during monsoon.

The CIL has already issued a LoA to Bara Daya Energi Consortium for imports of 6 MMT coal on the east coast and west coast.

Subsequently, CIL awarded the contract for supply of 7.91 lakh tonnes of imported coal to PT Bara Daya Energi Ltd (consortium) during August and September - 4.295 lakh tonnes coal for the month of August and 3.615 lakh tonnes for the month of September.

Cancellation

While CIL has confirmed that it has cancelled its maiden tender, it didn’t cite any reason. However, reports from within the trade said the company found Adani’s financial bid to be high.

PT Bara Daya Energi had quoted Rs 2,000 per tonne less than the rate quoted by the Adani group firm in the medium-term tender for sourcing additional 6 MMT of coal from overseas.

So, Coal India Board in its meeting held on 8 July, decided to cancel the short-term tender of 2.416 million tonnes and asked the Indonesian firm to supply the indented quantity as well against the medium-term tender.

Import Necessity

The move to import coal is significant in the wake of the government making all efforts to build up stock of coal to avoid the recurrence of power outages which happened in April on account of shortage of the fossil fuel.

The government, further, decided on importing coal to build adequate stocks at power plants before monsoon rain hits coal mining and supply decreases. The power demand in the country in the post-monsoon period is at peak due to high agricultural consumption and warm weather conditions.

As part of the effort, the centre nominated the Maharatna firm as a centralised agency to increase coal supplies to state Gencos and IPPs through import of dry-fuel.

Competitive advantage

While Adani’s bid was cancelled on the grounds of being steeply priced, the firm has some clear advantages.

Adani owns and operates Carmichael mine with a capacity of 10 MT per annum in the Galilee Basin of Queensland, Australia, through its subsidiary Adani Mining Pty Ltd. The company is already supplying coal from the Galilee Basin to many Asian countries, including India, since early 2022.

The Group has two other advantages - proximity to port and previous experience of bagging coal import contracts from NTPC.

In June 2022, NTPC had awarded a contract worth Rs 8,308 crore to Adani to import 6.25 million tonnes of coal - the coal was to come from Indonesia and not from Adani’s Australian mines.

Also Read: New Government Push To Run Imported Coal-Based Plants On Domestic Coal