New Delhi: India’s largest power generation utility, NTPC Ltd, will directly import the coal it needs, instead of asking state-owned trading firms such as MMTC Ltd and State Trading Corp. of India Ltd (STC) to import the fuel to meet its requirements.
The decision is in line with a new coal import policy approved by NTPC’s board last month, a top company executive said.
According to the policy that will affect revenue from coal imports at the state-owned trading firms, NTPC will source coal through a combination of direct imports and purchases through state-run Coal India Ltd (CIL). It may import small quantities through traders during exigencies.
Mint had on 5 August reported on the proposal for direct coal imports, which is a fallout of a controversy surrounding MMTC’s execution of an order to import a record 12.5 million tonnes (mt) of coal valued at Rs6,000 crore for NTPC.
“We have already made a presentation to the power ministry about the same. NTPC and CIL will form a consortium which will be later translated into a joint venture (JV). Once the joint venture is established then all coal import jobs will be given to the JV,” said R.S. Sharma, chairman and managing director of NTPC.
The utility’s earlier coal import policy required NTPC to import coal through state trading firms such as MMTC and STC. NTPC can now reduce its coal import bill through direct imports that do not involve paying a commission to a trader. This could mean proportionately lower power-generation costs and, consequently, lower tariffs.
H.S. Mann, director, marketing, at MMTC and an MMTC spokesperson, declined comment for this story.
Given the country’s growing dependence on imported coal, partnering with CIL will facilitate the negotiation of better rates due to large quantities being procured.
“The coal import plans have been under discussion as we also want to get into coal import. Once NTPC forwards it to us, we will take it up at our board level,” said CIL chairman P.S. Bhattacharyya.
Coal is critical for NTPC as at least 80% of its installed capacity of 31,134MW is coal-based. The utility has a requirement of around 160 million tonnes per annum (mtpa) and imports around 10%, or 16 mtpa, to meet the shortfall. Domestic coal is priced around 30-40% cheaper than imports, depending on the quality.
“The market for thermal coal has turned into a sellers’ market and is likely to remain so in light of the expected severe demand-and-supply gap in India. In such circumstance, consolidation of demand for internationally traded coal may enhance bargaining power and may extract price preferences,” said Dipesh Dipu, an expert on the mining sector.
“The transaction mechanism then becomes the key differentiator, and it may be inferred from the trends thus far that the tendering process adopted by Indian state utilities may have not yielded the best results,” Dipu said.
According to the Union power ministry, the power sector is facing a coal shortage of around 105 mtpa, which is expected to rise to 225 mtpa by 2012. The size of the market for imported coal that goes into power generation in India is around 50 mt a year, and is expected to double by 2012 as more thermal power projects come up.
Coal demand in the country is around 600 mt and is set to touch 2,340 mt per annum by 2030.
India has a known coal resource base of 264,000 mt, the fourth largest in the world, of which proven reserves are around 101,000 mt.