Change in coal e-auction policy will hit Bhushan Power's Odisha plant.

The change in the Centre's policy on e-auction of coal - reducing the quantity put up for bidding - has left a question mark over the viability of Bhushan Power and Steel's 2.3 million tonnes a year integrated steel plant in Odisha.

This unlisted entity should not be confused with Bhushan Steel. It became a separate entity following a division of assets by the Singhal family - while Bhushan Steel went to Brij Bhushan Singhal and Neeraj Singhal, Bhushan Power and Steel (BPSL) went to Sanjay Singhal.

Until last month, BPSL was sourcing its monthly requirement of 500,000 tonnes of thermal coal - 6 million tonnes annually - from Coal India (CIL)'s open-market offerings . The interim measure secured coal for BPSL's 506 MW captive power plant in Jharsuguda, Odisha.

The company was paying an average price of Rs. 3,000 a tonne in the e-auctions, or three times the average price of coal sold to power utilities through firm contracts.

This month, it had to import coal for half of its requirements, paying far more than it does in the e-auction.

The company sourced 1.5 lakh tonnes of Australian coal, at prices as high as Rs. 5,000 a tonne.

According to a company official, in September, the company will have to either meet its entire fuel requirement through costly imports or restrict captive generation, thereby cutting production.

Either way, BPSL's bottomline, which had improved from Rs. 256 crore in 2009-10 to Rs. 635 crore in 2013-14 is set take a major hit in 2014-15.

'We made an appeal to CIL last week, urging it to resolve the crisis that has put the Rs. 37,000-crore investment and 17,000 jobs (at Jharsuguda) at risk,' a BPSL official told BusinessLine.


HBL