Coal India to be probed for supply of low grade coal to sponge iron, power plants

Poor quality coal pollutes more; anti-competitive fuel supply agreements also under scanner of Competition Commission of India

By Anupam Chakravartty
Published: Saturday 14 September 2013

Sponge iron manufacturers always get the blame for polluting the environment. But if one were to go by the complaint of the manufacturers, it is government public sector undertaking Coal India Limited that is mostly responsible for the pollution. The Sponge Iron manufacturers of Association (SIMA) of India has filed a complaint before the Competition Commission of India (CCI), stating that poor quality of coal supplied to various sponge iron manufacturing units across the country has not only caused losses in production and decreased efficiency of the plants, but is also causing pollution because such coal has high ash content.

This week CCI clubbed SIMA's complaint with complaints filed by various power producers to investigate the charges against CIL of supplying low grade and low quantity of coal, violating the clauses of fuel supply agreements (FSA) with these industries. The CCI bench headed by chairperson Ashok Chawla asked director general of CCI to investigate the charges levelled by SIMA and power producers such as Maharashtra State Power Generation Company and West Bengal Power Development Corporation.

Coal diverted for super profits

CCI would also investigate anti-competitive fuel supply agreements signed by SIMA and CIL, in which SIMA has accused CIL of taking undue advantage of its market position—CIL enjoys monopoly over production of coal. According to Deependra Kashiva, executive director of SIMA, sponge iron industry has suffered greatly because of the sub-standard quality of coal supply. He accused CIL of not honouring commitments to the sponge iron manufacturers. The bench headed by Chawla observed that CIL and its subsidiaries supplied less coal in spite of agreement to supply an assured quantity under FSA and under the New Coal Distribution Policy (NCDP), and that coal was diverted for sale through e-auction to earn super normal profits.

“All these, according to information, resulted in anti-competitive effects, leading to constraint on national growth, massive wastage of manpower and resources involved in production of sponge iron, leading to enormous energy loss. Poor quality of coal supplied led to lesser production of sponge iron, consequently resulting in lesser production of steel,” stated the bench.

High ash content in coal

Kashiva has alleged that 80 per cent of the coal supplied by CIL to sponge iron manufacturers is of 'E' and 'F' grade, which has high ash content produced during the burning of non-coking coal. “According to FSA with CIL, the coal miner was supposed to give us linkages to 'B' and 'C' grades for sponge iron manufacturing units,” he added. As a result of this, there is higher emission of dust in the form of fly ash which occupies most of the thermal boilers, which are used to mould iron ore pellets into sponge iron. On the other hand, the quantity of coal supplied to the manufacturers was 30 per cent less than the quantity offered in the FSA.

As per Central Pollution Control Board norms, ash content for non-coking coal using sponge iron manufacturing units should be 27.5 per cent. Kashiva alleged that the coal supplied to manufacturers had ash content of 36 to 38 per cent. India is one of the biggest producers of sponge iron in the world. Over the past decade policy deficiency with regard to usage of fuel for the plants, and illegal mushrooming of sponge iron units across the country, and the industry's own reluctance to use efficient fuels has resulted in high air and water pollution.

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