Royalty-linked payments may hit mining firms' profits - Quoted in the Business Line

The proposed benefit sharing mechanism in draft mining bill may prove to be a mixed bag for the mining industry.

“Mining firms will have to pay an additional Rs 10,000 crore to the state governments, when the new law is implemented,” said Mr R.K. Sharma, Secretary-General, Federation of Indian Mineral Industries.
The draft mining bill envisages that coal companies share 26 per cent of their net profits with the project affected people. It also has provisions for all other mining firms to provide an amount equivalent to their royalty for the welfare of the displaced people.

However, an equity analyst with a Mumbai brokerage said though the impact of doubled royalty will hit the mining firms' bottomlines in the short term, the concept of benefit sharing could ease the process of land acquisition for projects in the long run.

The process of acquiring land for various industrial and development projects has become a vexed issue in the recent years with land-owners vociferously resisting such attempts.

Shares of mining firms reacted negatively to the Government's proposal. Coal India shares lost 8 per cent to close at Rs 362, while Sesa Goa shed 4 per cent to close at Rs 281. NMDC lost about Rs 2.55 per cent to close at Rs 258 on the BSE on Friday.

“We welcome that the Government has agreed to a royalty-linked fund rather than profit-sharing mechanism. However, a 100 per cent royalty will be a huge burden on mining companies,” said Mr Sharma said.
FIMI had vehemently opposed the initial proposal of mandatory 26 per cent profit sharing. As an alternative, it had suggested a royalty linked fund, wherein companies would pay an additional 26 per cent over and above their annual royalty payments.

Further, Mr Sharma said the mining firms would pass on this additional burden of royalty to end users such as metal companies, resulting in increased raw material costs.

“The profit share clause for coal mining is likely to result in the increase of coal prices on an average of Rs 60-100 per tonne, which is expected to result in electricity being dearer by 8-10 paise per unit, if the mining and power generation companies are able to pass the additional burden to consumer,” said Mr Dipesh Dipu, Director-Consulting for Mining at Deloitte Touche Tohmatsu India Pvt Ltd.

Also, there may be an impact on investment in coal mining as returns are likely to be substantially impacted.
“Considering that coal mining requires investments to be able to keep pace with growing demand, this may be a cause of concern,” Mr Dipu added.

ROA for Backward Integration into Coal Mining by Power Generation Project - My article in the Mining India magazine

Indian power generation sector has been facing growing demands that the sector has not been able to keep pace with. The shortages at peak loads have breached the range of 13%. This scenario has been forecast to continue as the capacity additions in power generation have fallen short of planned capacities. There are several reasons for the slow growth in capacity additions, including issues of land acquisition, rehabilitation and resettlement, financing, environmental and forest clearances, tight regulatory control on tariffs and fuel supply concerns. Of these, fuel supply concerns have been predominant. Indian power generation sector depends largely on coal with nearly 55% of the power generated from coal sources. This contribution from coal sources have been projected to continue for a foreseeable future due to availability, accessibility and affordability of coal. However, the growth in demand for coal has outpaced supplies. The shortfall in demand and supply of coal for power generation has reached nearly 50 million tonnes in 2010 and is expected to reach nearly 100 million tonnes by 2012. This has forced power generation project developers and investors to consider backward integration into coal mining.

Application of real options

Over the last 5 years of race for acquiring coal resources in India and abroad, power generation companies have been evaluating blocks to explore and produce coal. Where net-present-value (NPV) analysis suggests that the economics are positive, the companies enter into transactions to acquire the asset. Where the blocks prove uneconomic —as many do, usually because development costs are too high in relation to expected savings —acquisition is shelved.

All this, however, assumes the value of coal block what the blocks would be worth if the company starts developing them immediately. Real option technique on the other hand proposes evaluation of an opportunity as an option to develop if, at some point in the future, tariffs in the power generation sector make the backward integration economically feasible; or recoverable reserves increase through the use of new drilling and production technologies; or the price of coal from the market rise to an extent that can offset development cost; or a combination of these and other parameters.

In other words, the managers should apply the notion of options, as conceived in financial markets, to their own business situation. The question is the application of real options technique in the coal mining sector to assess a backward integration opportunity for power generation companies in India.

The approach can impact the way projects are evaluated

An increasing number of academics and corporate practitioners have been dissatisfied with the existing methods of resource allocation. Studies of corporate practices by Donaldson and Lorsch (1983), among others, reveal a continuing discrepancy between traditional finance theory and corporate reality, suggesting that managers have often been willing to overrule traditional investment criteria in order to accommodate operating flexibility and other strategic considerations they consider just as valuable as direct cash flows. It is now widely recognized, for example, that traditional discounted-cash-flow (DCF) approaches to the appraisal of capital-investment projects, such as the standard net-present-value (NPV) rule, cannot properly capture management's flexibility to adapt and revise later decisions in response to unexpected market developments. Traditional DCF approaches make implicit assumptions concerning an "expected scenario" of cash flows and presume management's passive commitment to a certain static "operating strategy" (e.g., to initiate a capital project immediately, and to operate it continuously at base scale until the end of its pre-specified expected useful life).

However, in the actual marketplace, which is characterized by change, uncertainty and competitive interactions, the realization of cash flows will probably differ from what management expected at the outset. As new information arrives and uncertainty about market conditions and future cash flows is gradually resolved, management may have valuable flexibility to alter its initial operating strategy in order to capitalize on favorable future opportunities or to react so as to mitigate losses. For example, management may be able to defer, expand, contract, abandon, or otherwise alter a project at various stages of its useful operating life.

This managerial operating flexibility is likened to financial options. A call option on an asset (with current value V) gives the right, with no obligation, to acquire the underlying asset by paying a pre-specified price (the exercise price, I) on or before a given maturity. Similarly, a put option gives the right to sell (or exchange) the underlying asset and receive the exercise price. The asymmetry deriving from having the right but not the obligation to exercise the option lies at the heart of the option's value.

An options approach to capital budgeting has the potential to conceptualize and quantify the value of options from active management and strategic interactions. This value is typically manifest as a collection of "real options" embedded in capital-investment opportunities, having as underlying asset the gross project value of discounted expected operating cash inflows. Many of these real options (e.g., to defer, contract, shut down, or abandon a capital investment) occur naturally; others may be planned and built in at some extra cost from the outset (e.g., to expand capacity or build growth options, to default when investment is staged sequentially, or to switch between alternative inputs or outputs).

Constraints in application of real options

The mining industry is one of the highest risk sectors in business. There are not methods to predict future cash flows of a mining project with any degree of accuracy during the 30 to 50 years of life time of this mine, including any metal prices, and prices of major inputs can be predicted with confidence. These may make application of traditional as well as real options seemingly difficult. However, real options obviously give better insights when an asset can be utilized at different points of time, depending upon emerging market conditions. Even then, the mining industry still does not use or adopt real options as a standard analysis when evaluating a (greenfield/brownfield) mine project.

Some of the main reasons are that it seems too complex and the lack of tools to run real options analysis and thereby be able to compare the results with more standard and well established methods.

One of the concerns with regard to the application of real options is that an attempt is made to take into account risk factors in valuation inputs by applying adjustment factors (typically probabilities). This process introduces additional risk to the valuation process, which remains un-quantified in the real options realm. The process of applying probabilistic risk factors on fundamental inputs also makes the process discretionary. Instead of dealing with "solid" expectations, one deals with adjusted inputs, and for non-specialists there is a general sense of reduced transparency and auditability of fundamental inputs.

The key to adopting techniques like real options lies in the organization having the right strategy and options skills, with the mental agility to view a project in that way are lacking within the finance structures of the organization. Even global multinational companies continually struggle with how to use what are essentially high caliber but generalist skills in strategy and problem-solving. Clearly, someone using real options requires a high level of skills in mathematics, resource modeling, and mine optimization. To find human resources with all these skills is difficult.

The real options modelers of the mining industry need to have a strong mathematical and financial background. When the traditional approaches are looked at for their results it seems crude assumptions have been used to solve cases of evaluation (for example, most analysis may not consider the variable grade distribution available to a mine). It seems that the real options approach using simulation is able to have much more realistic assumptions. One of the key requirements for the simulation approach is automated optimizing scheduling tools which are in very short supply in the industry.

Case for Application

Indonesia has emerged as the largest source of thermal coal for India. Power generation companies looking to secure coal supplies and to control prices are actively pursuing acquisition opportunities in Indonesia. While, due to regulatory changes made in the last couple of years and uncertainty in some of the implementing regulations, the pace of investments is likely to slow but the interests in Indonesian coal is unlikely to be abated. This is certainly due to proximity to Indian shores and potential of inland transportation through waterways. With the Indian electricity consumers determining the affordability of coal from import sources, these advantages work in favor of Indonesian coal.

If the price of coal is considered to be one single key determinant of value and for investment decision making, then using traditional evaluation mechanisms can lead to erroneous results as it would depend upon the time at which the decision is being made.

Considering the price movements for the past as depicted in the chart below, where prices are in US Dollars per tonne FOB at ports of Australia and South Africa.

Even if it is assumed that there is relatively higher degree of accuracy in price predictions or forecast, using NPV or IRR method in May 2008 for assessment of a coal mine in Indonesia for power project in India would indicate a negative decision. This would change if the same asset were to be analyzed in May 2009. In the absence of real options technique the power generation company would let the investment opportunity pass by since the NPV at these points of time are discreet.

But when real options technique is utilized, the decision of investment includes new parameters, which may have to evaluate what if the project is started with a time lag of if the investment in equipment and machinery and hence, production is delayed. These may be captured through the following decision possibilities:                       

Traditional methods -

May 2008 -NPV is likely negative, do not invest. Resultant – less expensive investment opportunity foregone

May 2009 - NPV is likely positive, do invest. Resultant – more expensive investment opportunity taken up

Real Options methods:

May 2008 -Possibility of upturn and unlocking when prices pick in a year. Resultant – less expensive investment opportunity taken

May 2009 - Similar to traditional methods.

From the view of power generation companies in India that have been looking for coal assets in Indonesia and other countries, the strategic intent is to secure supplies for the project life. This strategic decision using a traditional approach can cause havoc and lost opportunities for fuel securities.

Conclusion

Power generation companies in India that have been on the prowl to acquire coal assets abroad must consider the real option evaluation for assessment of the targets since their objective are long term and they have the option to decide the course of coal mine operations, which in itself has value attached.

The following framework (Source: Real Options – Managerial Flexibility and Strategy Resource Allocation by Lenos Trigeorgis) summarizes the sources of value in an asset, which are likely ignored by the traditional approaches of evaluation.

Category Description

Option to defer Management holds a lease on (or an option to buy) valuable land or resources. It can wait x years to see if output prices justify constructing a building or a plant or developing a field.

Time-to-build option (staged investment) Staging investment as a series of outlays creates the option to abandon the enterprise in midstream if new information is unfavorable. Each stage can be viewed as an option on the value of subsequent stages and valued as a compound option.

Option to alter operating scale (e.g. to expand; to contract; to shut down and restart) If market conditions are more favorable than expected, the firm can expand the scale of production or accelerate resource utilization. Conversely, if conditions are less favorable than expected, it can reduce the scale of operations. In extreme cases, production may be halted and restarted.

Multiple interacting options Real-life projects often involve a collection of various options. Upward-potential-enhancing and downward-protection options are present in combination. Their combined value may differ from the sum of their separate values; i.e., they interact. They may also interact with financial flexibility options.

It can only be expected that with computing tools available with high computational speeds that can make even simulation exercises feasible in no time, the application of real options for evaluation of coal mines by the strategically keen power generations companies will begin to be in vogue soon.

Indonesian Regulation on Benchmark Pricing - My views

The Indonesian regulation for benchmarking of coal prices for all transactions was proposed based on the new mining law of 2010, and the implementation is likely to be effective September 2011. The key features of this regulation are that the minimum prices for coal are to be set by the Minister for Energy and Minerals. A Standard Price will be fixed monthly and adjusted back for non-FOB vessel sales. The coal Standard Price will be fixed by reference to a number of indices. IUP holders (mining leaseholders) that sell mining materials below the Standard Prices may be subjected to administrative sanctions including (i) written warnings, (ii) suspension of part or all of the activities of exploration or production operation, and/or (iii) revocation of the IUP/IUPK. All contracts (term and spot) must be submitted to the Minister and there are substantial reporting obligations in relation to price, volume, quality and point of sale, including invoice, bill of lading and certificate of quality. There are also mandatory rules for use of letters of credit, which are likely to affect existing financing structures and require parties to renegotiate their terms of payment for off-take contracts.

For those Indian power producers who have been importing coal from Indonesia, and do not own mines, or own minority stakes with no preferential pricing, there is unlikely any impact as prices of coal are linked to global indices in any case.

For those, who own stakes in mines, the Indonesian rule will force such companies to transact at market prices, which may be seen as raising the cost of delivered coal in India. This is true but is not fatal. When companies invest in Indonesia, they tend to have the intent to sell coal at cost so that Indonesian business unit remained at no or negligible profits. This in a sense cannibalizes the Indonesian coal business unit for the power plant unit in India. Taking a holistic view, however, the cash flows in an integrated Indonesian coal mining and Indian power generation unit after this regulation will continue to be similar (albeit a little lower, obviously), except that royalty and income taxes will be paid in Indonesia, and the cash flows will need to be brought on the books on Indian power project after paying taxes in Indonesia through appropriate and innovative business structuring.

Many Indian companies that have established business structures and have holding companies for coal mining assets abroad and have only an ultimate parent level connection between the Indonesian coal company and Indian power generation company will end up making losses in the Indian power company if the power generation was envisaged and bid for based on cost plus approach to coal procurements from Indonesia.

Tata Steel seeks to sustain Europe strategy - Quoted in the Financial Express

For Karl-Ulrich Kohler, chief executive and managing director of Tata Steel Europe, it’s still not time for celebrations, yet. After seeing a significant turnaround at the steel giant, the industry veteran, with a doctor’s degree in metallurgy to boot, is now pulling out all the stops to ensure the results of the “weathering the storm” initiative are sustainable in the long run.

Kohler, who had to take up the challenging job at the helm just eight months after he was appointed COO of the company, told FE, “We initiated the ‘weathering the storm’ programme, a basket of actions, where we had taken spontaneous measures to do whatever we can to survive, and we were successful. We now have to think what is our future plan and how we make it more sustainable and successful in our European business.”

Kohler prefers to refer to the company’s targets and strategy to achieve them as a journey — a journey that should take the company to its desired profitability and cash position in a time frame of five years.

The latest turnaround saw Tata Steel, which reported a consolidated net loss of R2,009 crore for the year ended March 31, 2010, post a profit after tax of R8,983 crore for FY2011, on the back of higher sales and realisations, coupled with cost-cutting measures, initiated in the aftermath of the financial crisis. The idea now is to make this performance sustainable.

Targeting to achieve an Ebidta of $100 per tonne, Tata Steel Europe is also looking to close the gap between its competitors by organising itself in the market.

Tata Steel aims to be more of a solution provider to its partners rather than just be a steel supplier and hence, is focusing on technology leadership and operational excellence. To achieve this, it has already started taking measures by right positioning its cost. The company has recently announced its plan to turn around its long product business in the UK and said it will invest £400 million in its long product division over a period of five years to move up the value chain, as Kohler does not see the demand for long product reviving to the 2007 levels in the near future. It also announced plans to further rationalise capacity in the UK by mothballing one blast furnace at Scunthrope, which produces long products.

According to Dipesh Dipu, director, consulting — mining and metals — Deloitte Touche Tohmatsu India, the European economic scenario in general and the construction sector in particular seem largely dependent on the approach to resolve the crises facing several countries. “Success of investment strategy and capacity building in long products are, therefore, derivatives of the geo-political and economic directions European countries adopt for the short and medium term,” he says.

A recent report by JP Morgan believes that the recent restructuring move by Tata Steel in the UK is the step in the right direction given the weak demand scenario in long products and unlikely improvement in the near term. “The recent restructure would likely reduce the capacity by further 1 mt and bring the total capacity to 17 mt from the acquisition capacity of 22 mt. (Teesside 4 mt capacity was sold earlier),” it says.

There are still more clouds in the horizon, including fears of a double-dip. But Kohler is prepared. “We have to work more to drive efficiency in the UK, so that overall, the company has a concerted growth going ahead,” he said.

Karnataka raises alarm over fuel crunch - Quoted in the Business Standard

A severe and unprecedented fuel crunch has stalled development of critical power projects worth Rs 12,000 crore in Karnataka. The concerns led Chief Minister B S Yeddyurappa to discuss the issue with Prime Minister Manmohan Singh here today.

Karnataka, which has the highest state GDP growth rate of 8.2 per cent among the four southern states, does not possess fuel resources of its own and depends on coal blocks and gas supply allocated by the central government. This was Yeddyurappa’s fifth meeting with the PM in the past three years over the issue.

States ruled by the Bharatiya Janata Party (BJP) and National Democratic Alliance have been complaining of discrimination by the Union government while allocating coal blocks, especially in power generation. Karnataka is also ruled by the BJP. “We are going to discuss with the Prime Minister the issues of coal and gas shortages for our plants where investments worth Rs 12,000 crore are lined up, but are not getting materialised in the absence of fuel availability,” Yeddyurappa told Business Standard before the meeting.

The BJP’s national executive in Lucknow last month had passed a resolution asking for the states ruled by it to come together and put pressure on the central government.

Karnataka is upset with the Centre’s alleged indifference to the fuel shortage being faced by its upcoming power plants for more than three years and is now compelled to look at acquisition of coal assets abroad, becoming the third state after Andhra Pradesh and Maharashtra to do so.

After meeting the PM, Yeddyurappa handed him a detailed note on the capacity and investments stuck in the state due to non-availability of fuel linkages.

“Investments worth over Rs 5 lakh crore were committed by industry in the state during an investors’ meet in June. However, the prospects now seem grim as we have land, water and money but no coal and gas,” he said.

The state had earlier chalked out plans for an overall power capacity addition of 8,200 Mw to bring down its power deficit of 2,100 Mw, against a demand of 8,500 Mw of electricity annually. With the development of these plants, the state also hoped to cut down its power import bill of over Rs 1,200 crore every year. However, thanks to the coal shortages, a major chunk of this capacity is set to be hit.

The big-ticket projects which have come to a halt include the 1,600-Mw Yermarus thermal power plant and the 700-Mw Bellary super thermal project. While orders for equipment for both the projects have already been placed on the state-owned Bharat Heavy Electricals Ltd, civil work has stopped due to the absence of coal allocation. Financial closure for the projects could not be achieved as lenders insist on coal linkage.

Other projects facing the heat include the 800-Mw Edlapura thermal power plant and the 1,600-Mw Godhna super-critical thermal power project, proposed to be developed in Chhattisgarh.

While land has been acquired and preliminary clearances obtained for both the projects, work has stopped in the absence of environmental clearances as the environment ministry is insisting on coal linkages.

“In the absence of coal linkage and environmental clearances, the capacity addition will suffer, adversely affecting the state’s planned growth rate in the 12th Plan,” Yedyurappa told the PM. The chief minister also informed the PM of the concern over the increased power cost that would accompany the strategy of heavy reliance on imported coal.

The southern state is looking at Indonesia and Australia as possible geographies to source coal from. “We are looking at possible joint ventures in the two countries to meet our shortfall of coal,” Yedyrappa said. Recent policy changes in the two nations, however, have made imports of coal costly.

“Coal imports by a state utilities on their own are advisable only when there is huge quantum of import involved in view of relative bargaining power. Importing coal, for a state like Karnataka, could put a burden of up to roughly 25-30 per cent additional cost on per tonne basis on the state utility, as compared to sourcing coal domestically,” said Dipesh Dipu, director of mining practice at consultancy firm Deloitte.

ICVL faces fresh hurdles in bid to acquire stake in MEC - Quoted in the Mint

International Coal Ventures Pvt. Ltd ’s plans to acquire a 24% stake in Singapore-based MEC Coal may come unstuck with one of the promoters of the former, NTPC Ltd, insisting that the latter give a bank guarantee against the $200 million upfront payment.


The state-owned energy company also doesn’t want ICVL to invest in a holding company but directly in PT TOP Indonesia, the MEC entity that owns the Indonesian coal mines from which it is looking to source 6 million tonnes per annum (mtpa) of coal at a 15% rebate than the market price and another 4 mtpa at the market price— both as part of the deal.

ICVL was set up by five state-owned firms, NTPC Ltd, Steel Authority of India Ltd (SAIL), Coal India Ltd, Rashtriya Ispat Nigam Ltd and NMDC Ltd to secure overseas coal assets. The MEC deal was to have been its first.

“We are not comfortable and have made our stand clear. It is now for ICVL to deal directly with MEC and for the ICVL board to go ahead with the deal,” said a senior NTPC executive who did not want to be identified.

C.S. Verma, chairman, Steel Authority of India Ltd (SAIL) and head of ICVL said, “the transaction is under discussion,” and declined comment. An MEC spokesperson said in an email that “MEC is in discussions with a number of off-takers in both India and China, with equity and without equity. As we are bound by confidentiality agreements, we cannot discuss details at this time.”

NTPC’s nod is necessary for the deal as apart from being one of the five companies that has set up ICVL, the coal from the mines is to be used for its projects. Coal is critical for NTPC and at least 80% of its installed capacity runs on the fuel.

The company plans to increase installed capacity from 34,194 megawatts (MW) now to 75,000MW by 2017 and 128,000MW by 2032. It needs 160 mt of coal in fiscal 2012, of which around 16 mt has to be imported. The utility has already placed orders for importing 12 mt.

While private Indian firms have been successful in securing coal resources from foreign companies, government-owned entities such as ICVL and NTPC have not been successful. Bids by Indian miners tend to be relatively uncompetitive because most Indian companies seek the coal for their own end-use projects, while rival bidders may have higher-margin alternative plans.

Commenting on the strategy adopted by the Indian state-owned companies, Dipesh Dipu, director of consulting, energy and resources, and mining at Deloitte Touche Tohmatsu India Pvt. Ltd, said that the success of entities such as ICVL would be a function of the “cohesion between the entities that comprise the consumers and the miners, which are likely to bring different business perspectives to the table.” At one level, this can help better “assessment of target resources”, he added, but it could just as easily “lead to conflicts.”

With demand for coal increasing, acquisition activity involving coal mines would only increase, Dipu said. And Indian companies would “face competition from Chinese companies.”

ICVL itself has gone up against Chinese coal miners such as China Shenhua Energy Co. Ltd and Yanzhou Coal Mining Co. Ltd, which are actively engaged in acquiring mining concessions overseas.

India has a known coal gross resource base of 264,000 mt, the fourth largest in the world, of which proven reserves are around 101,000 mt. Demand is around 600 mtpa and is set to touch 2,340 mtpa by 2030.

Input glitches to hit MMTC's Q1 net - Quoted in the Mint

State-owned trader MMTC Ltd expects a delay in extending iron ore supply agree- ments with overseas steel com- panies to erode its profit for the three months ended 30 June. The company's long-term agreements with Japanese, Chinese and Korean steel mills expired on 31 March.

The Union cabinet had last week allowed the company to extend the agreements until 2014, but there was no busi- ness in the first quarter. “It is a major setback and will affect our bottom line,“ MMTC's acting chairman and managing director H.S. Mann said.

Iron ore exports form a sig- nificant portion of MMTC's profit. MMTC's revenue grew 52% in the year ended 31 March to `68,833.27 crore, but net profit dipped by 47% to `112.77 crore due to declining mineral ex- ports.

The government plans to di- vest its equity in MMTC this fiscal. Mann said the iron ore ex- port business was not viable because of government poli- cies. “Export of iron ore is not via- ble because of a 20% duty on fines. Also, the railway freight for exports is three times com- pared to domestic freight,“ he said.

“Iron ore mining and trading busi- ness has wit- nessed a regu- latory flux in the form of ex- port duties and profit- share propo- t nents current- ly being con- templated by the govern- ment,“ said Dipesh Dipu, director of director of consulting, energy and resources, and mining at Deloitte Touche Tohmatsu India Pvt. Ltd. “This has been confounded by the socio-political risks which have led to delays in im- plementation of mining and downstream projects like steel manufacturing. These risks are adversely affecting the indus- try's growth and investment potential,“ he said.

Attrition and retirement of experienced executives has also hit MMTC. The trader has 1,500 em- ployees, but 20-25 executives quit every year to join private sector companies, including Adani Group, Glencore Inter- national Plc and Cargill India Pvt. Ltd. “This is an issue with all the public sec- tor units (PSUs) and we have to live with that,“ Mann said. PSUs facing attrition are trying to retain staff by up- grading their skills. MMTC re- cruits mostly cruits mostly from the Indian Institute of Foreign Trade and central uni- versities.

The company has dropped plans of buying overseas coal mines, commercial farming in Africa and generating electrici- ty locally, Mint reported on 4 July. The company plans to con- centrate on core business- es--minerals, metals and gen- eral trading. MMTC is also open to expand counter-trade agreement signed alongside state-owned Bharat Heavy Electricals Ltd (Bhel). In counter-trade deals, countries exchange goods and services rather than pay in cur- rency.

“We have already an MoU (memorandum of understand- ing) in place with Bhel for Malaysia for counter-trade. Malaysia has palm oil and tin, which are badly needed in In- dia. We are open to other op- portunities as well,“ Mann said.

To secure more orders over- seas, Bhel in a joint effort with MMTC plans to import palm oil worth $1 billion (`4,470 crore) from Malaysia, the sec- ond largest palm oil producing nation, in return for setting up a hydropower project in that nation. India, on an average, im- ports around 8 million tonnes of edible oil worth `26,000 crore every year. “We are open to expand our partnership,“ said a senior ex- ecutive at Bhel, who did not want to be identified.

Shares of MMTC fell 0.86% on the Bombay Stock Ex- change to `911.25 on Tuesday. The benchmark equity index, the Sensex, fell 1.65% to 18,411.62 points.