Coal news and updates

As the Narendra Modi-led government completes two years in office, the minister of states for coal, power and renewable energy Piyush Goyal takes stock of the hits and misses in his ministries and spells out the agenda for the remaining three years in an interview with FE’s Sumit Jha.

Q. Coal block auctions have been cited as a success by the government but only a handful of mines auctioned last year have actually started production. Is that a concern?

Ans. Is there a coal shortage in the country? Power demand has gone up by 7% in the last two years comapred to 5% in the two years before we (National Democratic Alliance government) took charge. So the demand is growing commensurate with the economic growth of the country. We have also focused on energy efficiency. In fact, coal-based power generation growth is even higher as the hydro power has struggled due to droughts. Last month, the electricity consumption went up by 11% while fossil fuel-based (coal and gas) generation has increased 16%. While power demand has gone up, plant load factor (utilisation) has gone down. But that’s explained by the fact that we have been able to revive many of the stranded power projects. Gas-based power capacity of 24 gigawatt (GW) has been stranded for years but we have been able to revive nearly half of that capacity through e-auction of imported regassified liquified natural gas (RLNG). Other plants have chosen not to bid or they would also have been revived. We have added 45 GW of geenrating capacity in the last two year, a growth of 22%. So its an elementary calculation that tells us why PLFs are lower.

Q. Some power developers say that despite higher production, CIL is not providing them full quota of fuel as per agreement. They are sticking what was decided in 2011 when there was coal shortage. Is the ministry looking into it?

A. I have instructed Coal India to fulfill commitments to the non-power industry as the generation companies are already entitled to their entire coal quote. The other industries were getting 50% domestic coal while the remaining amount was to be met through import substitution. However, they will also get the full quota after the ministry’s order. I believe its grossly unfair if this was not being done. However, this came to my notice only a few days ago and I have issued a an order in this regard, which will notified on Thursday.

Q. Is the ministry looking to bring in bidding route for procuring wind power?

Wind developers have realised the importance of transparent method of price discovery which was demonstrated in the solar sector. They realise that bidding brings in efficiency and tariff is right-sized. Cost-plus is not an efficient way of determining tariff. If solar power tariff continues to fall while wind remains at the same level, states would refuse to buy wind power. CERC and other state regulators decide a higher price, which I have found out are dictated by manufacturers at times. This provides no incentive for manufacturers to improve efficiency. The wind developers met me and they conveyed their intention of selling wind power through competitive bidding. This doesn’t require any policy change or announcement. We just have to start bidding in this sector.

Q. You have achieved all this in the last two years. Does commercial mining figure in your agenda for the next three years?

A. With time we will do that but right now we are not in any hurry. Globally, coal prices are down and if start auctioning coal mines for commercial purposes, we will struggle to get the right price. This will impact the eastern states which hold most of the coal mines. We have already started allocating mines to public sector enterprises for commercial mining. If we start auctioning mines for private sector, the public sector will have to buy from private sector. This would not serve the public cause. I want to make sure that do thing properly so that the government’s requirements are fulfilled at a lower price. However, I am calibrating and monitoring the progress very closely. The bottom line is whether you have coal or not. However, to answer the earlier question, we auctioned half the mines to public sector and the rest to private players. The mines were cancelled by Supreme Court because the public sector mines had been handed over to private entities in 74:26 joint ventures where the majority stake was held by private players for mine development. The court had realised that this was a case of subterfuge that the UPA had allowed. West Bengal and Karnataka had done this but these states are again trying to hand over these mines to the private parties. The private player involved in these states has gone to the court after we stopped the repeat of what happened earlier. However, the courts have stayed it and the government can’t do much in this respect.

 

Source: Financial Express