New Delhi: Lesser allocation of mines to steel, cement and captive power plants in the upcoming coal blocks auction may increase their dependence on costlier imported fuel, rating agency ICRA today said.
"The government's immediate focus seems to be the power sector, which is reflected by the increase in the share of blocks allocated to the sector...However, the "non-regulated" sectors have been given lower allocation in coal reserves to be auctioned in the first round, which will increase their dependence on costlier outside coal," ICRA said.
It further said that with iron and steel, cement and captive power sectors being clubbed under one group, the level of competition among the companies in the following sectors in the upcoming auctions is expected to be high.
As per an ICRA analysis, among the "non-regulated" sectors, coal cost relative to product price is the highest for the aluminium sector. Additionally, its margin also has the highest sensitivity to coal prices.
Therefore, the rating agency expects aluminium companies having large smelters at advanced stages to bid more aggressively in the upcoming coal block auction than the cement and steel sector players, whose margins have similar (but lower than that for aluminium) level of coal price sensitivity, it added.
The government on December 25 last year kick-started the auction process for 204 coal mines that were cancelled by the Supreme Court. The auction of coal blocks is due next month.
The Union Cabinet had earlier approved re-promulgation of the coal ordinance and necessary guidelines for mine allocations.
