Power sector’s coal linkage stays down

Severe constraints in raising production have forced the world’s largest coal producer, state-owned Coal India Ltd, to offer only a small 3.5 per cent increase in the quantity of coal linkages at 347 million  tones  for long-term fuel supply for the country’s power sector this financial year. It had committed 335 mt of fuel linkages for power plants in       2010-11.

The power ministry requires supply commitment of at least another 90 mt for new projects, with a combined capacity of 25,000 Mw likely to be commissioned in the three years ending March 2012. This is in addition to the linkages of 306 mt for existing plants commissioned before 2009. “We have asked the power ministry to distribute whatever coal is available with us to power plants on a priority basis. The rest of the requirement could be met by individual companies through imports,” said a senior Coal India Ltd (CIL) executive. The long-term linkages of 347 million tonnes per annum (mtpa) being committed by CIL for the current year comprise 306 mtpa for power plants commissioned before March 2009 and 41 mtpa for new ones. “We are requesting them to distribute 41 mt among the new plants through the Central Electricity Authority (CEA). We will supply it from our coal companies which have more stocks,” the executive said.

CIL does not want to sign Fuel Supply Agreements (FSA) since it does not want to bind itself to committed quantity. “If coal is produced but not reached to the consumer, there is no logic in signing an FSA,” said an executive.

The growth in the transport of coal through Indian Railways has been very disappointing for the past three years. While our production has grown significantly, dispatch has not kept pace with it. Coal transported through the railways grew by a mere 1.5 per cent, one per cent and three per cent in 2008-09, 2009-10 and 2010-11, respectively. However, production by CIL grew at an annual rate of six per cent in these years.

Offloading constraints, primarily inappropriate availability of railway rakes, had pulled down supply to power plants last year by 10 per cent to 304 mt, as against a target of 335 mt. The target had comprised 306 mt for existing power stations and the remaining 29 mt for new plants. “The power sector could not get 31 mt coal last year even as the company added seven mt to its stock, which has grown to exceed 71 mt from 21 mt five years back. This is due to the logistics problem,” the official said. There has been a slight improvement in railway rakes availability. The average daily number of rakes available for CIL has so far gone up to 182, as compared to 158 last year.

The coal monopoly also attributes its failure to meet the targeted 460 mt production in 2010-11 to the No-Go policy and the Comprehensive Environment Pollution Index moratorium on industrial clusters imposed by the Jairam Ramesh-headed environment ministry.

What worries Coal India is its ability to meet only 50 per cent of the demand from power companies, owing to the constrained domestic production. It has requested the power ministry to ask companies to secure the rest of their requirement through imports. The New Coal Distribution Policy of 2007 had made it mandatory for CIL to meet the entire demand for the power sector and even resort to imports in case of shortfall. CIL is not keen to take on the responsibility of importing.