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Power producers not importing coal even at decade-low prices

Power plants in India are not importing coal despite global prices of the fuel slumping to decade-low levels. Power generating companies are rather operating at lower capacity on domestic coal that is short in supply, as distribution companies (discoms) are not willing to pay for costly power fuelled by imports.

A Mumbai-based trader, who did not wish to be identified, said global prices had fallen to a 10-year low due to weak demand from China that is reducing dependence on imports by encouraging production from own mines.

He said prices of 4,200 kcal/kg thermal coal in international markets were hovering around $36.50 per million tonne as against $52 per million tonne two years ago.

"The demand from Indian buyers is not in proportion to the low prices.

Though there have been tenders seeking imported coal supply, but that have been floated by the regular companies. Ironically, there is no substantial rise in demand even as the coal prices are at almost 10-year low," the trader said.

Private power producers are abstaining from blending imported coal in their projects as that makes power costlier and is not purchased by cash-strapped discoms.

Last year, the government allowed power producers to recover cost of imported coal from consumers but most state utilities are against buying expensive power.

Power and coal minister Piyush Goyal told Lok Sabha that of the 54 million tonnes coal expected to be imported this year, power firms imported only 17 million tonnes as imports are costlier and are not bought by consumers. Indian power plants can accommodate only up to 15% of imported coal that has to be blended with domestic coal.

Association of Power Producers director general Ashok Khurana said state power discoms are not purchasing power as there is no demand from the high-paying consumers like industrial and commercial units.

"Blending imported coal makes power costlier, especially in northern and central regions that are away from the coasts. Indian thermal power plants are operating at 65% of their capacity since there is low demand from industries that subsidise low-cost supply to agriculture and retail consumers," he said.

Another coal trader said Indian buyers were not signing any coalsupply deals as most of them are expecting further drop in prices of thermal coal. Demand for coal is also low due to favorable weather conditions that reduce demand for electricity, he said.

Only state-run power companies are floating tenders seeking imported coal supply. NTPCBSE -0.43 % has just floated a six million tonne tender of its import target of 14 million tonnes for this year. Power generating utilities of Tamil Nadu and Maharashtra have sought around 4 million tonnes each.

Source: The Economic Times