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Poor quality coal led to 5% extra Mahagenco power tariff hike

Even as Mahagenco is being hauled over live coals by political parties and consumer activists for its poor performance, the company has dropped a bombshell that tariff hike could have been less by 5% in 2012-13 had coal quality not been exceptionally poor. This revelation puts coal companies, especially WCL and SECL on the mat.

Mahagenco, in its affidavit filed before Nagpur bench of Bombay high court, did not state this directly but said that it suffered a loss of Rs2,160 crore in 2012-13 due to grade slippage and this amount was recovered from consumers. The company stated that WCL caused a loss of Rs1,000 crore while SECL caused a loss of Rs1,100 crore.

Coal is classified into seven grades in India on the basis of calorific value and ash plus moisture content. Grade A coal has highest calorific value and lowest ash content while Grade F coal has lowest calorific value and highest ash content. Genco has claimed that it received coal of two to three grades below what is mentioned in the contract. This grade slippage has led to lower generation and higher pollution level.

Consumer activist Anil Wadpalliwar has filed a public interest litigation (PIL) in the high court seeking judicial intervention in turf war between Mahagenco and coal companies, which was leading to frequent power tariff hikes.

Genco has stated that SECL coal was the worst as the loss due to grade slippage was Rs1,896 per tonne. WCL came a distant second with a figure of Rs573 per tonne. MCL coal's quality was better with loss figure of Rs123 per tonne. The company has given a clean chit to Singareni coal stating that it did not incur any loss due to its quality.

The company claimed that it was helpless in checking the coal quality due to monopolistic nature of coal supply business. The fuel supply agreement (FSA) signed with coal companies was heavily loaded in their favour. This was evident from the fact that the weight of sample was higher than the prescribed limit. According to Bureau of Indian Standards (BIS) norms, the coal sample must not be more than 3.50kg in weight. However, the coal companies tested coal quality from a sample weighing 50kg. Other BIS norms were also not being followed.

Mahagenco and WCL had gone for third party sampling on orders of HC and when the results were against the latter it claimed that the sampling agency CIMFR did not have required expertise. Mahagenco has strongly countered this pointing out that CIMFR was created in 2007 by merging two earlier agencies, CMRI and CFRI. The latter was the first institute in India established in 1946 with a focus on coal technology. Thus, WCL had questioned the competence of CFRI.

Mahagenco defenceless

When TOI asked Mahagenco why it was not taking action against its officials who had signed FSAs that had led to a loss of Rs2,160 crore, a senior official said, "Our people don't have any option but to sign. WCL officers do the sampling and analysis. We have no role in it. These points were raised in our petition in Competition Commission of India (CCI)."

Source: The Times of India