CIL may take over IndianOil's explosives division
New Delhi   06-Jul-2012

Coal India Ltd plans to take over IndianOil's explosives division and expand its capacity to meet the requirements of the mining giant.

CIL Chairman S Narsing Rao said: "The explosive division originally belonged to IBP. IBP was merged with IndianOil and its importance in the overall schemes of things diminished. However, explosives are an essential input for us and we intend to take over the company lock, stock and barrel, invest in it and increase its capacity. At present the explosives division of IndianOIl meets about 20-25% of our requirements"

CIL's move comes just after Competition Commission of India (CCI) imposed a penalty of 60 crore on 10 private explosives manufacturers following a CIL complaint that they had formed a cartel. It was found by CCI that Gulf Oil Corporation Ltd, Ideal Industrial Explosives Ltd, Solar Industries India Ltd, Blastec India Pvt. Ltd and Indian Explosives Ltd among others had formed the cartel in supplying explosives to Coal India. CIL spends about 1,500 crore annually in purchasing explosives and the project is expected to result in significant savings for explosives procurement. It will also ensure smooth supply in case of any disruption from private players.

Officials said CIL is also considering a strategic stake in the unit apart from a takeover, and a memorandum of understanding would be signed soon. The IndianOil explosive division has seven bulk plants and three satellite plants. Its total capacity is about 71,000 tonnes per year and some its units are located at Singrauli, Dhanbad, Talcher, Rajmahal.

CIL has also signed a memorandum of understanding with GAIL and Rashtriya Chemicals & Fertilisers to form a joint venture that will revive the closed FCI unit. The idea is to manufacture ammonium nitrate from coal gas at this FCI unit. CIL's interest in the project lies in sourcing ammonium nitrate which is used in manufacturing explosives for its mines. It is expected to ensure at least 25-35% of CIL's ammonium nitrate requirement. Large players in the private sector include Indian Explosives and Gulf Oil among others. Two types of explosives are generally used by CIL-subsidiaries -- bulk and large diameter (LD). Bulk explosives are commonly used in open cast mines and the main component is ammonium nitrate while LD is used for underground mines and comprises 25 % of the explosives used. LD is a readymade explosive while bulk explosives are prepared with detonator and their ingredients which are prepared just before the blast is executed," he said.

Though predominantly an oil company, IBP diversified its activities in to engineering and chemicals. The venture in to explosives by the chemical division was, based on a suggestion from the Indian government when the country faced acute shortage of explosives for mining industry following an accident and strikes at the only major supplier -- IEL in India in 60's.

The IBP's first packaged slurry explosive manufacturing plant was set up in Korba (then in MP now in Chhattisgarh) in the year 1976 under the collaboration from Ireco Inc. USA. The unit commenced its commercial production in August 1977. Thereafter the chemical division has diversified its business in to a unique technology 'the bulk delivered slurry explosives' with the first ever plant of its kind set up in India at Kudremukh with a capacity of 5000 tonnes per annum in 1980. The first ever supply of site-mixed bulk slurry explosives took place in 1980 in a blast using 63 tonnes of this product. Over the past 25 years, by 20th Dec 2005 it has completed supply of 64,695 MT of SMS explosives to Kudremukh Iron Ore Project.

For IBP, the journey in bulk explosives commenced at Kudremukh continued a long way with new plants set up in both coal and metal mining sectors. The second plant came up at Singrauli (MP) in the year 1983 followed by Block-II Dhanbad (Jharkhand), Ramagundam (AP), Rampur Agucha (Rajasthan), Kusmunda (Chhattisgarh).