Tata Steel and state-run Steel Authority of India Ltd (SAIL), the country’s two biggest makers of the alloy, are all set to form a joint venture to mine coal blocks for securing assured coking coal supply to meet their increasing production needs.

“SAIL and Tata Steel are likely to sign an agreement to form a joint venture company for mining four coking coal blocks, most-likely in Jharkhand which have reserves of about 500 million tonnes for meeting their production needs,” a senior government official told PTI.

New entity

He said both companies would seek to put in place a formal JV company through the pact and then begin scouting for more coal blocks. The Board would have representatives from both the companies. The new entity is likely to have an initial capital of Rs two crore, to be shared equally.

In view of the growing steel demand, both the firms have embarked on major capacity expansion plans to ramp up production capacities. While SAIL aims to increase output to 26 million tonnes at a cost of more than Rs 50,000 crore, Tata is also executing major brownfield and greenfield expansion projects.

The move comes amid efforts by many metal companies in India and abroad to ensure raw material supplies. SAIL itself has formed another joint venture with four other public sector firms to acquire overseas coal properties. Besides, the overseas wing of Coal India Ltd is also reported to be scouting for coal mines in Mozambique and Australia. “Due to major expansion plans of steel firms, securing raw materials is crucial for them. By 2020, more than 70 million tonnes of coking coal will be required, of which 85 per cent will have to be imported if not produced domestically,” the official said.

India’s demand for coking coal may exceed to two billion tonnes a year by 2031-32, up from about 460 million tonnes per year currently, the steel ministry official said. Separately, the Coal Ministry is in the process of allocating 23 blocks for captive use by public and private companies as per directions of the Energy Coordination Committee, headed by the Prime Minister.

These blocks have non-thermal grade coal and would be allocated to steel and cement sectors. To implement the ECC decision, 44 blocks of CIL that are not scheduled for production during the 11th Plan would be alloted to others.

During 2007, the Coal Ministry allocated 17 coal blocks to central and state PSUs for commercial selling without the restriction of captive mining.