The Telegraph
Since 1st March, 1999
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Full FDI in captive coal for steel, cement firms

Calcutta, May 16: The coal ministry has approved 100 per cent foreign direct investment (FDI) in the captive mines of cement and steel companies, up from 74 per cent now.

The proposal, if cleared by the cabinet, may see the captive coal mines of Tata Steel, Essar, Ispat and SAIL run almost only on foreign cash, a prospect that could also hold true for cement firms like ACC and UltraTech Cement.

“The industry ministry had asked us whether we were in favour of allowing 100 per cent FDI in captive mining in steel and cement sectors. We have okayed the proposal,” P. C. Parakh, secretary in the ministry of coal & mines, said at the launch of CoalJunction here today.

To attract FDI in coal, the government has already allotted coal or lignite mines for captive consumption to private companies setting up or operating power projects. Foreign investment up to 100 per cent is allowed in such ventures, provided the coal or lignite produced by them is used entirely for their own generation.

Conditions on 100 per cent overseas investment in mines of cement and steel companies will be the same as those in power. One of these is that the foreign firm will not engage in coal mining or sell washed and sized coal from its processing plants in the market. The washed coal must be sent back to firms that own the raw mineral.

The coal ministry recently allotted 90 blocks for captive mining ' to be largely used by steel and cement firms ' and hopes to get 180 million tonnes of output from them.

Coal auction

CoalJunction that Parakh launched today will be an e-auction site for selling coal. It will largely benefit Coal India, which will be able to sell its output in a cost-effective manner. CoalJunction is a part of MetalJunction Services Limited ' a joint venture of SAIL and Tisco. MetalJunction at present provides an e-market for steel.

Coal India has decided to sell 10 million tonnes of coal through the e-auction route. It would like to sell at least 15-20 per cent of its total production through e-auction.

Parakh said with the deregulation of the coal sector since January 1, 2000, the need for better mechanisms for sale of coal has been felt. This will prevent black marketing as well as make coal freely available to all genuine consumers.

“E-auction brings in transparency in coal sales. Prices may see a rise in the initial phase but it will stabilise in the long run,” Parakh said. Viresh Oberoi, managing director of MetalJunction, said they are eyeing a total transaction of Rs 8,000 crore through MetalJunction.

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