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Captive power producers rap coal firms for irregular supply

With captive power capacity of 34,000 Mw facing a shortage of coal, the downstream sector is recording a rise in production costs. As coal companies have made no allocation to these in the past six months and the transport policy of the Railways being ambiguous, the costs of captive power producers (CPPs) have more than doubled.

In a letter to Mahanadi Coal Ltd (MCL) and South East Coal Ltd (SECL)— two subsidiaries of Coal India Ltd—, the Indian Captive Power Producers Association (ICPPA) has alleged in the name of according priority to independent power producers, they are getting only half their required coal demand. The annual coal demand of CPPs is 27.6 million tonnes. CPPs, mostly based in the south and east, get 37 per cent of the required coal from SECL and 50 per cent from MCL.

Earlier, CPPs used 45 per cent of India’s total industrial power and contributed 18 per cent to the total power generation.

CPPs, during discussions with Central Coal Ltd and MCL, said they would end up sourcing power from the grid supply, which was costly and not feasible, as there wasn’t enough generation capacity to match their demand. This, they said, could also have a cascading effect on grid and power supply management.

What has also hit CPPs is a Railways circular on the allocation of rakes. “Allotment will be treated cancelled when the rake is supplied for loading, but the siding holder does not commence loading before the expiry of the free time allowed,” said a February circular of the South Eastern Railway. Arguing against this, CPPs said the period allowed was eight days; after that, the rakes lapsed and couldn’t be booked again. “For the past four months, the coal supply has been irregular because the Railways refused to change its stand on this,” said an ICPPA executive.

Under the ‘new offer and allotment system’ of coal rakes between Railways and coal companies, the fuel supply agreement will be on the basis of the estimated coal production, at the mine pit head. At a meeting with stakeholders, including Railway officials, CPPs said the fuel supply agreement was based on commitment linkage by the coal ministry, according to the National Coal Distribution Policy.

In the circular by the South Eastern Railway, which carries the most stock load of mines based in the East India, it was also mentioned once the rake allotment was cancelled, it could be supplied to another destination with a valid allotment. “In this case, the beneficiaries are independent power producers, who end up getting 99-110 per cent of the required supply. But we lose even the basic demand,” said a senior member of ICPPA.

He added independent power producers took this coal through roads, and this hit CPPs.

MCL officials, however, said there was surplus at pitheads, adding there was confusion over supply between the Railways and CPPs.

“Railway sidings near our mines are overloaded with coal. It’s the CPPs that are delaying the procurement. If the rake is cancelled, we will have to re-allocate that amount,” said the official.

CPPs have also raised the issue of the quality of coal. They allege as the quantity of coal has dipped at mine pitheads, they are being supplied leftover coal, with more than 40 per cent of stones and ash. “We have told Coal India just because we are secondary beneficiaries, it doesn’t mean we won’t get good-quality coal,” said an ICPPA member.

Under National Coal Distribution Policy 2008, for coal supply, the primary emphasis is given to independent power producers; captive power producers come next.

Source: Business Standard