Lesser allocation of mines to steel, cement and captive power plants in the coal blocks auction may increase their dependence on costlier imported fuel, says rating agency ICRA.
´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 the ICRA analysis, among the´non-regulated´ sectors, coal cost relative to product price is the highest for the aluminum sector. Additionally, its margin also has the highest sensitivity to coal prices.