India's SAIL Begins Development of Captive Coking Coal Reserves

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi) has begun to develop two coking coal reserves at Tasra and Sitanalla, which are part of the Jharia coal fields in the state of Jharkhand, with production capacities of 4 million tons per year and 500,000 tons per year, respectively. The company also will construct a pithead beneficiation plant at Tasra.

SAIL's total availability of coking coal from captive mines will increase to 7 million ton per year. SAIL will invest $33 million for the development of the Tasra and Sitanalla mines and begin operating them by 2013.

Currently, SAIL consumes 14 million tons of coking coal to produce 14 million tons of hot metal per year. Coal consumption is forecast to reach 21 million tons per year by 2013.

SAIL has floated tenders to invite bids for the development and operations of the Tasra open-cast mines. This is the third time that the company is inviting bids for the development of the mines; twice earlier, the bids were canceled because SAIL believed project costs were too high. The project cost for development and operation of the Tasra mines also included the resettlement and rehabilitation of the local population. SAIL officials said that the mine location was densely populated, and therefore project costs bid by prospective developers and operators were higher than the usual project costs of mines with similar capacities.

The Tasra and Sitanalla reserves originally were owned by Coal India Limited (Kolkata, West Bengal) but subsequently taken over by Iron and Steel Company Limited (IISCO) (Burnpur, West Bengal). The two coking coal reserves were part of the legacy received by SAIL when the latter took over the near defunct IISCO in 2006.

SAIL officials said that despite the increase in coking coal supplies from captive mines, the company will remain dependent on imports, and that total imports are expected to rise to about 14 million ton by 2013. For this, the company has invited expressions of interest from overseas coking coal asset owners or suppliers who would be keen to enter into long-term contracts with SAIL for a supply of hard coking coal. Officials said that long-term supply contracts will be finalized within the next three months.

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