Government orders out of turn coal to PSUs; private plants to be hit

28th May 2018

In a jolt to private power producers, the government has ordered Coal India Ltd to make ‘out-of-turn’ allotment of scarce coal to central and state electricity generation companies.

The order follows a Coal Ministry directive earlier this month that instructed companies like Mahanadi Coalfields Ltd to deploy rakes of coal only for power plants and not other users like captive power plants of private industries.

In a May 24 letter to Coal India, the Coal Ministry said there may be an increased demand for coal due to a surge in demand during peak summer.

Power generation in April, it said, “has been more than the programmed generation and this, in turn, may lead to a more than anticipated increase in demand of coal from the power sector.”

“In order to avoid possible shortage of coal at thermal power plants it has been decided that wherever it is operationally feasible based on various factors like coal stock availability, where suitable transport arrangements are in place etc, out of turn coal allotment may be made to state and central PSU (electricity) generation companies (Gencos) to meet the surged coal requirement for power generation,” the ministry said in the letter, reviewed by PTI.

Industry sources said a coal shortage looms in India as demand for electricity is expected to hit record peaks during summer months. Also, Coal India Ltd has lagged in meeting surge in demand.

Out of turn allocation would have a direct bearing on coal allocation under the ambitious scheme named SHAKTI or the Scheme to Harness and Allocate Koyla (Coal) Transparently in India, as well as that done through e-auction. Under the SHAKTI scheme, fuel was to be allocated to power plants holding letters of assurance (LoAs).

Sources said coal allocation under these is under threat as Coal India has been failing to meet its production target and would not supply the scarce fuel to PSUs on priority.

The move to divert fuel from coal starved power projects would take a heavy toll on the already ailing sector, they said, adding the government continues to back PSUs at the cost of independent power producers in coal allocation.

Plant Load Factor or average capacity utilisation of state-owned NTPC plants is over 70 per cent while independent power producers (which are essentially private firms) are bleeding at 55 per cent PLF.

Coal Ministry has admitted to coal shortage even after making tall claims of rise in production, they said, adding it has now directed Coal India to supply fuel out of turn to PSUs to keep them running and prevent losses, all this at the cost of the private sector.

The move comes at a time when power producers are under tremendous stress and struggling to keep the projects afloat, they added.

Source: THE ECONOMIC TIMES