Exploring funding opportunities in the coal mining sector

Student name: Mr Debayan Chakraborty
Guide: Dr Rajiv Seth
Year of completion: 2011
Host Organisation: Tata Capital Limited
Supervisor (Host Organisation): Mr Sanjeev Kumar

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Abstract: • Coal is characterized by either “steam coal” or “metallurgical coal.” Metallurgical/ coking coal is used to produce coke, which in turn is used as a reluctant in blast furnaces for the production of steel. Coal is of four types: lignite, sub-bituminous, bituminous and anthracite.Energy content and sulphur content help to determine the best use of particular types of coal, as well as being used to determine the price of different qualities of coal.

• Nationalization of the Indian coal industry occurred in the early 1970s’ following which, the Coal Mines Authority Limited was formed in May 1973.coal is the dominant source of energy and met 52.4%, while oil and natural gas met approximately 41.6% of the total primary energy requirement of India in fiscal 2009

• The coal mining process includes planning, extraction, conveying, processing or beneficiation and transportation

• The policy framework for coal includes Nationalization of Coal Mines, Acquisition of Coal Bearing Land, Reconnaissance Permit, Prospecting Licence and Mining Lease, Royalty Payable, Conservation and Development of Coal Mines, Transfer and Validation in relation to Coal India Limited, Laws relating to Mines Safety, Pricing of Coal, Coal Imports, Distribution and Marketing Policy

• Thermal power plants burn fossil fuels to produce heat, which, in turn, gets converted into electricity. Fuels such as diesel and furnace oil are also used, although on a smaller scale. The choice of fuel for thermal power plants depends on the plant size, and the cost and availability of various fuels at the location. A coal-based plant is usually located near coal mines or where it is economically feasible to transport coal.

• technological advances have revolutionised the economics of power generation and transmission, and altered the way the industry operates. prices of both residential and industrial power have risen due to an increase in construction and fuel costs for the utilities.Transformation to an unbundled, competitive structure. Reforms include Unbundling and privatisation, Deregulation of the industry, Creation of a competitive market in power generation and marketing, Opening up of the domestic electricity markets to foreign investmen, creation of electricity pools and independent system operators.

• Type of Cement include Portland cement, Ordinary Portland Cement (OPC), Moderate Heat Portland Cement (MHPC), Rapid Hardening Cement (RHC), Sulphate-resistant cement (SRC, White cement, Blended cement Expansive cement/Shrinkage compensated cement, Super high strength cement , Alinite cement, Product mix - Shift from OPC to PPC, Ready mix concrete (RMC)

• Cement Manufacturing process includes the process of Raw material, Benching, drilling and blasting, Crushing, Pre-homogeneous, Raw mill grinding, Blending and storage, Pre-heating stage and kiln

• The cement industry includes 140 large cement plants with an installed capacity of 260 million tonnes and more than 365 mini cement plants with 11 million tonnes of effective capacity. Pan-India players include Holcim-controlled ACC and Ambuja (42.3 million tonnes) and Aditya Birla-controlled Grasim Industries, Century Textiles and Ultratech Cement (57.8 million tonnes). Cement is a high-volume and low-value commodity. The second category consists of players like Lafarge (East), India Cement (South), JP Associates (North and Central), Shree Cement (North), Binani Cement (North), Kesoram Industries (South), OCL (East), etc. players like Panyam Cement, Penna Cement, etc, are concentrated in one region.

• Cement is a high-volume and low-value commodity. Transporting cement beyond a distance makes it unremunerative for end-users, thus making the cement industry largely regional in nature.

• Steel making process includes production of Steel from iron ore in a blast furnace. This is followed by Processing of molten iron into coke in a basic oxygen furnace

• Steel is a metal alloy consisting of iron as the key component. It consists of carbon and other alloys, which vary according to the grade of steel .It is hot and cold formable, weld able, hard, lustrous, a good conductor of heat and electricity, malleable, ductile, recyclable and resistant to corrosion, water and heat. The industries in which steel is used include construction, automotive and transportation and engineering. Steel is also used in the production of power lines, pipelines, electrical and electronic appliances and containers. Growth driers include growth in Indian Economy, low per capita consumption of finished steel, increase in demand for steel and growth in the Indian Automobile Sector

• NBFCs should invest in the coal mining sector because of the huge number of players involved in the entire coal supply chain, huge untapped coal reserves, significant infrastructural expansion, increase in demand for coal, expenditure in new and better technologies

• South West Pinnacle Exploration provides state of art Drilling and Associated Services to esteemed clients for their Exploration & Production activities in Mineral, Coal and Coal Bed Methane.

• Tata Capital’s funding options include Equipment Finance, Imported Equipment Finance, Rentals, Top up Loans, Used Equipment Finance. Innovations by SREI which is a market leader in equipment funding include Paison Ki Nilami, Money Bag, Exchange Lease and Lotto catering to all clients

• Hence for Tata Capital to cater to big clients it can use a combination of “paison ki Nilami” and Top up loans or a “ Lotto” and Top up Loans; for medium to small clients a combination of Easy Lease, Exchange Lease, Money Bag and Top up Loans; for very small clients a combination of Easy Lease and Exchange Lease