Private power producers allege CIL selling more coal through e-auctions

30th july 2018

Private power producers have alleged that Coal India is selling increased quantities of coal through e-auctions and have sought to stop e-auction sales till the company’s supply obligations to the power sector to generate low cost power are met.

Ashok Khurana, director general of Association of Power Producers alleged that generators with supply contracts are receiving less than 75% of their stipulated requirements leading to severe shortage of the dry fuel at power plants. Instead, the country’s coal supplier is offering additional quantities through e-auctions that fetch a premium over the notified price.

The Association recently apprised the coal and power ministry of the issue and urged them to take it up on a priority basis.

A senior Coal India executive said the coal producer has ample production capabilities and there is no supply shortfall at pit head plants but non-pit head plants suffer from stock shortage due to logistics and law & order issues although we are ready to supply their full contracted quantity.

Rest of the coal that cannot be sent to power plants is auctioned and it is mostly carried through roadways on trucks, the Coal India executive added.

In fact, Coal India offered the auction route for stressed power assets to help the latter survive the onslaught of financial institutions.

Under the current scenario, the situation could be managed by restricting movement of coal by rail to power stations holding more than 21-days stock and operating at poor capacity utilisation levels. This coal can be diverted to plants facing critical stocks, particularly in the Northern and western Regions of the country.

“Indian Railways is adding new tracks and doubling existing ones while a large section of the tracks are also being electrified. It is expected to help evacuate additional coal,” the official said.

Nevertheless, data compiled by the Association indicates that in 2017-18 Coal India was to supply 528 million tonnes of coal as part of its fuel supply agreement with power companies. There was a shortfall of 104 million tonnes. In contrast, the company supplied 31 million tonnes to the sector through e-auction at an average premium of 27% earning revenue of Rs 4,371 crore.

Khurana said it is evident that Coal India has ample stocks to allocate under supply agreements but it chooses to allocate it under auction schemes. With inadequate coal supply, developers have no option but to fall back on e-auction or imported coal to meet their power supply obligations.

In a recently held auction, the premium was as high as 81%, reflecting the demand supply mismatch. Forcing generators to depend on imported or auctioned coal is leading to increased generation costs that are hovering between Rs 3.5 per unit and Rs 4.08 per unit.

Source: THE ECONOMIC TIMES