India: Cement sector may play cautiously at coal block auction

Bya897204973

Updated 2015-02-04

The government is expecting aggressive bids for all of the 46 coal blocks whose reallocation will start on 14 February 2015, especially for blocks assigned to end-use power generation. However, for the blocks apportioned to the unregulated sector, including the cement, steel and captive power industries, the cement sector is likely to step carefully. Cement companies lost allocations to 12 coal blocks following a Supreme Court order that held all captive coal allocations as illegal.

Imported coal prices fell sharply in 2014, easing the economics of cement production. If prices of imported coal turn volatile however, cement companies face further problems. "We cannot depend solely on imported coal prices staying low and neither can the government assure good quality coal on the open market. We expect to see aggressive bidding for the blocks," said H M Bangur, managing director of Shree Cement.

As per the bid regulations by the ministry of coal, there will be a forward bidding model for the steel and cement sectors. Forward bidding implies aggressive bidding for the coal blocks since the price of these commodities is market-driven. The government has to reallocate 46 operational coal blocks through auction by 31 March 2015.

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