Logic for alternative coal supply

SRIKUMAR BONDYOPADHYAY

Calcutta, June 21: The shortfall in domestic coal supply is unlikely to be met even if the penalty provision in the new fuel supply agreement (FSA) is increased to a maximum of 40 per cent, Coal India chairman S. Narsing Rao told The Telegraph on the eve of a meeting at the Prime Ministers Office.
Rao: Listing options

He said the country would have to look for alternative sources other than Coal India.

The average price that the power sector pays for our coal is around Rs 1,000 per tonne. Even if we had to pay the maximum penalty of 40 per cent on any shortfall from the minimum trigger level of 80 per cent of the annual contracted quantity, is that going to get them the coal? So, the question of very low penalty provision in the new FSA is not tenable for power companies not signing the agreement, Rao said. The penalty provision is one of the nine agendas to be discussed at the meeting. According to Rao, In 2000, the government and the Planning Commission envisaged that CIL will not be able to cope up with the demand for coal. So, they had set a production target of 520mt (million tonne) for Coal India for the final year of the Eleventh Five Year Plan and thereafter none. The production target for Singereni Collieries was 45 mt. The total coal supply from the public sector companies was estimated at around 560mt in the final year of the Eleventh Plan. Therefore, the government had thought about it and the incremental coal supply would have to come from alternative sources other than Coal India, Rao said.

Singh said by alternative source, the government meant captive blocks. Accordingly, coal resources worth 50 billion tonnes were allotted to various private and public firms from 1999 to 2009. The output from these blocks was estimated at 104mt by March 31, 2012 and 250mt in the final year of the Twelfth Plan. Since 1993, the Centre had allocated 213 blocks for captive use but only 28 have started production. NTPC, which was awarded the Pakri Barwari reserve in Jharkhand in 2004, could not produce anything from the block against an expectation of 25mt per annum. No doubt, Coal India fell short of its planned production target, but the shortfall was also there from captive sources. So, it is the failure of the entire system and there are a number of issues involved such as land acquisition laws, environment and forest clearances and state administration. All these have to be coordinated to enhance production, Rao said. Coal India, which has set a production target of 464mt for 201213, plans to supply 347mt to the power sector against 312mt in 2011-12. Calculated at 85 per cent plant load factor for power projects, the PSU will have to supply at least 393mt to avoid the penalty. This means Coal India may have to import 46mt this fiscal. The import provision is there in the new FSAs. But I doubt whether the consumers will find any value addition in CIL importing the coal and supplying it to them when they can get it imported by any other agency, Rao added.