Situation critical for power projects, which are facing acute fuel shortage

Embroiled in one controversy after another, the Manmohan Singh government's time and attention have been consumed by efforts to put out the fire on “troubled political fronts,” and it has ignored the power and coal crisis, which stares the country in the face and threatens to get out of hand.

Import costly

For instance, production of about 15,000 MW of thermal power, dependent on imported coal, has run into problems following the Indonesian government's decision making it mandatory for exports to be benchmarked to international prices since September. The most impacted by this decision are Tata Power, Reliance Power, Adani Power, JSW Energy and Lanco Infratech. These companies, once bullish on Indonesian coal, bid in the tariff-based competitive process for power projects, based on the agreements they had made for long-term fuel stock from Indonesia. The developers worked out their financial and other factors of the projects based on an average coal price of $40-$50 a tonne. But that has changed dramatically, thanks to the decision of Indonesia, South Africa and Australia to benchmark the price with international movement.

Developers going slow

The Manmohan Singh government has been sitting tight on the issue for the past few months. As a result, the developers have decided to go slow on these projects. Adding to this, Coal India Limited announced that it would not be able to achieve the production target and scaled it down from 452 million tonnes to 440 million tonnes, indicating that public and private coal-fired plants could face serious raw material problems in future.

The issue was to be debated and decided by a panel headed by the Prime Minister, after submission of reports by Planning Commission Deputy Chairman Montek Singh Ahluwalia and Member (Energy) B. K. Chaturvedi.

“The meeting by the Prime Minister has been postponed four or five times now. There is a complete lack of seriousness on the part of the government to confront such a serious issue which could lead to serious power and coal shortages in the coming months. The indecision on imported coal or, for that matter, on captive mines clearances is going to hit the economic growth and power production hard,” a senior official said.

According to Ashok Khurana, director-general, Association of Power Producers, the issue concerns about 20,000 MW of stranded capacity. “A decision needs to be taken. The bankers and investors are spurning the developers due to indecision on how to deal with these issues.” What has heightened the misery is the CIL lowering its production target for the ongoing financial year. It has already fallen short of its April-September target by about 20 million tonnes, recording an output of 176 million tonnes against the target of 196 million tonnes. The government undertaking has blamed it on inclement weather, including heavy rains in August-September that affected production in almost all its collieries.

India has 75 thermal projects that depend on CIL for fuel supplies. CIL has an 82 per cent share of the country's coal production, but has been unable to keep pace with the rising demand. On the other hand, the situation is critical for the power projects which have been facing a serious shortage of coal for the past few months with no solution in sight. Nearly a dozen projects, with a combined capacity of 16,175 MW have only a day's stock with them, going by recent Central Electricity Authority data.

According to official norms, power projects situated near coalmines are supposed to have two weeks' reserve stock and those located afar, at least a month's supply. Of these dozen-odd projects, six having a capacity of 11,410 MW belong to NTPC. “The situation for the NTPC projects is quite worrisome. We are getting our daily requirements but there is no stock build-up. There is a coal crisis and any small disruption will ultimately lead to a power crisis,'' a senior NTPC official stated.

At present, 30-odd thermal plants have coal stocks of less than four days. As per approach paper to the 12th Plan, the aggregate coal demand at the end of the 12 Plan period is likely to be between 900 and 1,000 million tonnes. The domestic output is unlikely to exceed 750 million tonnes, leaving a shortfall of more than 200 million tonnes to be met from imports. Coal imports are expected to rise from about 90 million tonnes at present to over 200 million tonnes from 2016-17.

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