Coal news and updates

Linkage rationalisation to save Rs 1,120 crore

January 19: The government’s recent decision to rationalise supply of coal against linkages to as many as 20 power plants is likely to bring in savings of Rs 1,120 crore to the country on account of saving in transportation costs alone, a top official in Ministry of Coal has said.

“KPMG has submitted a report, which indicates that if all the coal linkages are rationalised, the country would save about Rs 6,000 crore annually. So the action has already been started and we have rationalised about 20 linkages, which will save us about Rs 1,120 crore per annum. The exercise is going on,” Secretary (Coal) Anil Swarup said in Kolkata on the sidelines of an interactive session.

The Secretary (Coal) said a variety of linkages had been given over a period of time based on certain terms and conditions.

“But we discovered that we have an unusual situation where coal is being supplied to a plant close to a port from a hinterland mine and the coal that is imported is traveling all the distance to a hinterland plant. This may have happened at that point in time. But KPMG has submitted a report which indicates that if these linkages are rationalised the country would save about Rs 6,000 crore,” he said.

“It (rationalisation of linkages) will not only save money, but our environment as well because unnecessary haulage of coal from any mine to any plant will stop and it will go to the closest available plant. So that’s how it is being worked out. It will not be very easy. The low hanging fruits have already been harvested and now we have to go into slightly more difficult areas where a tripartite agreement has to be done as there are pricing and quality issues. But we are moving in that direction,” Swarup said.

“What we are trying to do (by rationalization of linkages) is to improve the supply of coal, and once the supply of coal improves, I think a lot of problems, that we have, will get sorted out and I am sure there still be problems for us to be relevant in some point in time,” the Secretary (Coal) said.

Asked about the financial impact of the rationalization or reshuffling of linkages from one plant to another, Swarup said, “There is not much of a financial impact on those respective bodies. In the second stage there is a financial implication. So we are working out a mechanism through which this advantage gets transferred to the companies which are using this coal. That’s where a detailed discussion is required.”

Asked whether that would amount to one plant paying higher for imported coal as it was using domestic coal and the other paying lesser for domestic coal as it was using imported coal, Swarup said, “These are trickier issues. The money should be transferred from one plant to the other. So far what we have done did not even involve these things.”