Private players cry foul as Coal India steps up supply to state-owned plants

02 January 2018

Private power companies are crying foul as Coal India (CIL) has stepped up supply to state-owned power plants without a long-term fuel linkage at a time when former’s generating stations are seeing a shortage of the dry fuel, saying this is in contravention of the government policy.

Association of Power Producers (APP), a lobby group of private generators, has claimed that CIL and its subsidiaries supplied excess coal to the tune of 8.6 million tonne to central and state generators during the first half of the current fiscal (April-September 2017). These plants are located in the states of Chhattisgarh, Rajasthan, Maharashtra, Rajasthan, Karnataka and Telangana.

The coal ministry had in February 2016 issued an office memorandum to regulate allocation of ‘bridge linkages’ to power plants which have been given captive mines to meet fuel requirements.

According to the laid down policy, a bridge linkage is just a short-term and temporary arrangement till production commences from the allotted mines. Moreover, coal is to be supplied on a “best effort” basis and without any sort of commitment, said AAP’s director general Ashok Khurana in a recent letter to coal secretary Susheel Kumar to draw attention to the fuel shortage facing private power plants.

The letter has also alleged that state-owned generators are diverting coal to these plants from their other generating stations.

In this context, APP has expressed disappointment over the permission granted to NTPC to divert coal from the Ramagundam plant to Kudgi generating station and from the Kahalgaon one to NTPC Barh.

Significantly, both Kudgi and Barh generating stations do not have any commitment of coal supply from CIL. Khurana has said that such diversion of coal violates the spirit of the coal ministry’s policy on regulation of bridge linkage allocation.

APP has said that CIL is supplying excess coal to state-owned plants even as it is unable to meet its commitment under fuel supply pacts signed with private generating stations.

Domestic coal supply has failed to keep pace with consumption in recent years, with CIL unable to ramp up output. Given this constraint, the government has allotted coal blocks to central generators like NTPC and state utilities to help them meet their fuel requirements on their own instead of depending on CIL and its subsidiaries.

However, allocatees have failed to start mining operations matching with commissioning schedule of power plants. They are depending on coal supply from CIL under arrangements like bridge linkage.

For example, the government has allotted ten blocks to NTPC to mine coal so that it could meet fuel requirements of its power plants without having to depend on CIL and subsidiaries. These blocks have potential to produce more than 100 million tonne of coal a year.

But so far, NTPC has started production from the Pakri Barwadih mine only and that too in a limited manner. Development work at coal mines allocated to state utilities too is proceeding at a tardy pace.

The government continues to allocate coal blocks to state-owned utilities on a nomination basis even after it has switched to competitive bidding for allotment of coal mines to private players. Not only that, private players are also having to bid for fuel linkages.

Not only private producers, aluminium smelters who depend on captive power to run their operations, too have faced acute coal shortage in recent months.

For example, in the first six months of the fiscal, Vedanta Aluminium received only 0.63 million tonnes of coal, against a contracted quantity of 1.48 million tonnes – a shortfall of 57%. Fuel supply to Hindalco was short by 78% as it received only 0.2 million tonnes of supply, against the 0.89 million tonnes it had secured in the linkage auction. Balco received 1.40 million tonnes of linkage coal against an assured supply of 1.77 million tonnes.

Under the terms of the auction and the fuel supply agreement, CIL is required to supply 75% of annual contracted quantity. Any shortfall would attract a penalty.

Smelters have been forced to seek Prime Minister Narendra Modi’s intervention to defuse the coal crisis.

“The investment of Rs 1.2 lakh crore in the aluminium sector, holding a debt of Rs 70,000 crore and the employment for 7.5 lakh people, is at a very critical risk in the coal shortage scenario,” said a recent letter from Aluminium Association of India to the prime minister.

Coal crisis has worsened in the recent months, forcing power companies to step up fuel imports. Coal imported for thermal power plants during October stood at 1.60 million tonnes, up from 0.18 million tonnes in the corresponding period in the previous year, registering nearly an eightfold increase. In this scenario, the assurance given by coal minister Piyush Goyal to end India’s dependence on imported coal rings hollow.

Source: THE WIRE