Domestic vs imported coal: calculate the delivered-heat break-even

Start with the quote boundary

Write down exactly what the quoted price includes. Domestic offers may start at a mine or siding, while imported offers may be FOB, CFR or delivered at a port. A commercial comparison needs one destination and one transfer-of-risk point. Add only the costs the buyer actually bears: loading, freight, port handling, unloading, inland movement, insurance where excluded and relevant non-recoverable taxes. Do not add ocean freight to a CFR quote a second time.

The official framework grades non-coking coal by gross calorific value, but a grade name is not a complete operating specification.[S1] Ask for the measurement basis, sampling protocol, moisture and ash analysis, size distribution, dispute mechanism and rejection rights. A lab number from one basis cannot be compared directly with an offer using another. The purpose of the normalisation is to prevent a mathematical advantage that disappears at the plant.

Work the arithmetic before negotiating the premium

AtUSD 65/t CFR, the imported alternative costsINR 6,760/t delivered andINR 1,229/Gcal, againstINR 1,050/Gcal domestically. At a 2,450 kcal/kWh heat rate, those assumptions translate to aboutINR 3.01/kWh andINR 2.57/kWh respectively. These outputs are calculated scenarios. The formula makes it possible to replace the assumptions with current bids without presenting an unverified spot price as market intelligence.

Identify the variables that can reverse the result

A currency move is a direct cost change when the purchase obligation remains in dollars. AtUSD 65/t CFR, eachINR 1/USD change addsINR 65/t before any foreign-currency freight or financing costs. A 100 kcal/kg downgrade is more important when the starting calorific value is low, because it represents a larger share of the heat purchased. The sensitivity should use the contract’s settlement rules, not only the nominal certificate.

There can also be an efficiency effect. If ash, moisture or combustion properties change the achieved station heat rate, holding efficiency constant is no longer a fair comparison. Compare a technical team’s tested operating envelope with the commercial model. A small fuel-price advantage can be consumed by a higher heat rate, more auxiliary consumption, reduced throughput or an operating constraint. Do not assume every effect moves favourably for the higher-GCV fuel.

Separate an attractive price from an executable supply route

A source is commercially available only if the buyer can obtain the required contract and transport access. The July 2026 government disclosure describes expanded domestic linkage access under the revisedSHAKTI framework.[S2] That is a reason to investigate available options, not evidence that a specific consumer already has an allocation, a winning bid or suitable coal. Confirm the operative tender and contractual terms.

Route reliability belongs alongside delivered cost. The official logistics update identifies rake placement, congestion and multimodal interfaces among evacuation constraints.[S3] A nominally cheaper route with uncertain timing may require more buffer inventory. Quantify the incremental working capital and the business impact of interruption before comparing that route with a more predictable alternative. Keep price risk and delivery risk as separate decision lines.

A procurement record that survives scrutiny

For each offer, preserve the dated bid, normalised cost bridge, quality basis, route assumptions, currency assumption and technical acceptance. Show a base case and at least two stresses: an adverse price or currency move and an adverse quality or logistics outcome. The committee should be able to see whether the recommended contract remains attractive under both, and which risk is being consciously accepted.

• Ask finance to reconcile recoverable and non-recoverable taxes rather than embedding a generic tax rate.
• Ask operations to sign off the relevant blend and quality envelope.
• Ask logistics to confirm the unloading and transport chain, including interface responsibilities.
• Refresh the break-even when bids, FX, quality or contractual terms change; an old threshold is not a permanent sourcing rule.

The final comparison should explain the trade-off, not merely rank two numbers. A slightly more expensive supply lane can be rational if it secures a genuinely useful alternative. Equally, diversification that shares the same bottleneck may buy very little resilience. The model is valuable because it exposes those judgments and makes their financial consequences reproducible.