New Delhi: India’s biggest power generator, NTPC Ltd, expects to start production from the captive coal mine block allotted to it at Pakhri Barwadih in Jharkhand by the year-end as it tries to achieve fuel security and reduce dependence on Coal India Ltd, or CIL, the company’s primary coal supplier.
“We will start coal production by the end of 2009 from Pakhri Barwadih block... I agree that the production is much delayed... There were land acquisition problems,” said a senior NTPC executive who did not want to be identified.
Coal is critical for NTPC as more than 80% of its installed capacity of 29,894MW is coal-based. However, a majority of its coal-based projects don’t have 15 days’ coal stock as mandated.
Dependability factor: NTPC’s Unchahar, Uttar Pradesh, plant. NTPC is trying to secure a stable fuel source.
The company plans to add 22,430MW of capacity by 2012 and has an overall demand of 125 million tonnes per annum, or mtpa, of coal. Recently, it floated a global tender for 8mtpa of which only 5-6mtpa will be used this year. The rest of its coal requirements are to be met through supplies by CIL.
NTPC expects coal from captive blocks to cost only one-fifth of what it pays CIL for current supplies.
However, the company is yet to select the operator for the Pakhri Barwadih block, which has gross coal reserves of 1,350 million tonnes, or mt, for which firms such as Australia’s Thiess Pty Ltd are vying.
Defending the time frame set for captive coal mining, another NTPC executive said: “Once the operator is appointed, which will be done shortly, mining can immediately start with major requirement being earth-moving equipment.”
NTPC had earlier planned to start coal mining from the Jharkhand block by the end of 2007. Mint had reported on 11 October 2007 about procedural and infrastructure delays that upset its plans.
NTPC believes 70% of the gross reserves of this block can be commercially extracted.
While the company is expected to pay an operator fee of about Rs800 per tonne, coal from the block may be used to bridge the shortage at the company’s plants at Talcher in Orissa, Farakka in West Bengal and Kahalgaon in Bihar.
“The success of coal mining project implementation in India appears largely dependent on the success of contract mining business model as many of the companies with allocated captive coal blocks do not have expertise and capacities for coal mining,” said Dipesh Dipu, principal consultant, mining, with audit and consulting firm PricewaterhouseCoopers. “The contract mining business model on engineering, procurement, construction, operations and maintenance, or Epcom, basis is still evolving and may have regulatory, commercial and contractual risks from both mine-owner’s and contractor’s perspectives.”
This is not the only captive coal mining plan of the company that has faced delays. Even the Orissa government delayed water linkage to NTPC’s captive coal mining project at Talaipalli fearing protests from farmers as reported by Mint on 22 April. And its overseas plans of acquiring a coal mine with a capacity of around 20mtpa is yet to bear fruit.
NTPC’s efforts to mine coal from captive blocks is to ensure a stable fuel source for its power plants. This would have also cushioned it against any sudden spikes in the price of coal.
The power company has been allocated eight captive coal blocks by the government. The other blocks given to the company are Kerandari (228mt), Chatti Bariatu (243mt), Chattrasal (150mt), Dulanga (260mt), Talaipalli (965mt), Brahmini (1,900mt) and Chichro Patsimal (356mt). NTPC plans to invest about Rs10,000 crore to produce 50mt of coal annually by 2013.
With around 67% of India’s total power generation currently based on coal, the power sector is the major consumer of the fossil fuel in the country, absorbing nearly 78% of the total domestic production. Coal demand in India is expected to grow rapidly as the country seeks to add 78,000MW of generating capacity in the next three years.