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Somani Group to establish joint venture with Russia’s Mechel OAO

Diversified company Somani Group Monday said it had set up a joint venture firm with Russian metals to mining major Mechel OAO to cater to the growing demand of coal in the country, reported the Press Trust of India (PTI).

Somani Group's President Atul Verma told PTI that the JV, Mechel Somani Carbon, will source coal from Mechel's mines in Russia and other countries and process it in India to give just-in-time delivery as per the requirement.

The JV is for stockyard operations, where Somani intends to supply coal to needy industries in Orissa, Chhattisgarh, Jharkhand and Andhra Pradesh among others, said Verma.

According to Verma, the new company will also invest over Rs 100 crore to fund its expansion, including creation of infrastructure for the stockyard, to be built at Vizag. Somani would not like to commit any particular figure, Verma noted, when asked about the JV's estimated coal supplies to Indian entities in a year, reported PTI.

Verma, however, added that the joint venture company will be importing 6 to 8 shipments of coal from Mechel's mines, amounting to about 2,50,000 ton in a year.

According to him, the idea is to have a stock of about 40,000 ton in the stockyard at a given time and this will be supplied to small and medium enterprises, who cannot import coal on their own due to high logistics cost. The venture will be a just-in time delivery of coal for the orders received, he added.
The coal reserves of 267 billion ton in India are the fourth-largest in the world after the US, Russia and China, although coal production at around 400 million ton falls short of the demand by 10% annually, said Verma.

With huge capacity additions in the sectors like steel, cement and power in the coming years, the demand-supply gap of coal is set to go up further and the new venture will try to grab a significant market share in next 2-3 years.

The Somani Group President added that demand for coal in 2021-22 is projected at 1,353 million ton against the production assessment at 1,084 million ton, leaving a shortfall of 269 million ton, indicated PTI.

When asked about the expansion plans of the new company, Verma said that depending upon the success of the new venture, the Somani Group-Mechel combine may also look for setting up similar stockyards at West Coast or at South-west coast of the country, said PTI.

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