Coal news and updates

Captive power producers see rise in coal prices

Industries banking on their own power projects are increasingly unable to operate their captive plants at full capacity as prices have shot up after the government reduced the quota of coal to be offered in auctions so that more fuel is made available for independent power producers. "In recent auctions for coal, we have noticed that quantity offered by Coal India subsidiaries has gone down to just one-third of the earlier lots.

There is a shortage of coal for power projects owned and operated by the industries as the supplies to independent power projects are on the rise," said Indian Captive Power Producers Association secretary Rajiv Agrawal. Units that use low-grade coal have been especially affected because it's not viable for them to replace the fuel with imported coal.

These units had already been facing a coal shortage for the past five to eight years and the situation has worsened after the government's curbs on auctions. The government, seeking to boost generation of electricity, ordered state-owned Coal India to ensure that adequate fuel is supplied to operational power plants and those that are due to be commissioned by March 2015.

It also started rationalising supply agreements, known as fuel linkages, to optimise transport of coal and reduce the cost of power.

India has about 50,000 MW of power plants installed by industries in sectors such as steel, aluminum, paper, cement, chemicals and textiles, equivalent to 20% of the country's installed generation capacity as of September end. Companies including Hindalco Industries, Jubilant Life Sciences, Balco, DCM, Ultratech, SRF, Aditya Birla Chemicals, India Glycols and Adhunik Alloys & Power own and operate power plants to fuel their units. In recent auctions held by state-owned MSTC Ltd and MJunction Services Ltd, an equal joint venture between Steel Authority of India and Tata Steel, bidders offered to pay as much as 150% more than the reserve price for coal mined at Bisrampur, Korba, Sohagpur and Raigarh, according to industry sources. However, captive power producers were unable to buy the desired quantity of coal because the volumes offered were low, prices were high and in some cases, due to problems in transporting coal from the mines that are not linked to the rail network.

"Industrial units are not able to get adequate coal, either from linkages or from auctions. Also, it was not possible to evacuate coal auctioned in past rounds by railways and transporting it by road was not viable for the industries, while independent power producers can easily pass additional cost burden to end users," said Agrawal.

Last year, Coal India was ordered to sign fuel supply agreements for power projects with a total capacity of 78,000 MW.

Source: The Economic Times