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Indian govt steps in to ensure coal supplies to power plants

The Indian government has thrown a life-line to thermal power plants stranded without assured coal linkage by prodding producer Coal India Limited (CIL) to commit a minimum 440-million tonnes of fuel to the power sector during 2014/15.

The roadmap to bail out thermal power plants experiencing an absence of fuel supplies has been prepared by the Power Ministry, and government would implement it, as pushing CIL to increase tonnage for the power sector was the only available short-term solution, an official in the Power Ministry said.

Power generation would require an estimated 445-million tonnes of coal during the current fiscal, of which CIL has been directed to supply 440-million tonnes while the balance of 5-million tonnes would be imported by the miner to bridge the demand-supply gap.

During 2015/16, the demand from the power sector was forecast to increase to 524-million tonnes, and import dependency would increase to 84-million tonnes, since CIL could not be expected to achieve a growth rate in production to match the higher demand, the official added.

According to the Power Ministry, 7 230 MW of new thermal power generation capacity had been commissioned over the past few months, but all these plants had no long-term coal supply linkages for assured supplies of coal. Another 10 930 MW of thermal power capacity was scheduled to go into production by March 2015, which also did not have any coal supply linkage with miners.

These power plants either did not have captive coal-mines or, if they were allocated coal blocks, mines had not gone into production while the power plants would be ready.

As part of its plans to assure coal supplies to such power plants, the government will ensure that CIL offers a minimum of 50% of coal requirements of such thermal plants without charging any premium. Normally, the miner charged a 40% premium on supplies to power plants that did not have fuel supply agreements.

This would make it imperative for CIL to step up and ensure fuel supplies if new capacities were to be made viable at the production stage, the official said.

Simultaneously, the official expressed doubts over CIL’s - which accounts for 80% of coal supplies in the country - ability to achieve substantial growth in production given past performance records.

For the current fiscal, the miner had signed a memorandum of understanding with the government setting a production target of 507-million tonnes, a 10% increase over the 462.5-million tonnes achieved during 2013/14, barely 2.3% higher than that achieved in 2012/13.

Source: www.miningweekly.com