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NTPC seeks states as allies against Coal India

Power producer writes to states over poor calorific value of coal being supplied, miner ‘concerned’ over step
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First Published: Tue, Apr 09 2013. 11 45 PM IST
NTPC claims that while it is being charged for coal with a calorific value of 5,000 kcal/kg it is getting that with a calorific value of 3,500 kcal/kg. It has held back payment of `2,000 crore to CIL on this account and denies owing any money to the miner. Photo: AFP
NTPC claims that while it is being charged for coal with a calorific value of 5,000 kcal/kg it is getting that with a calorific value of 3,500 kcal/kg. It has held back payment of Rs.2,000 crore to CIL on this account and denies owing any money to the miner. Photo: AFP
Updated: Wed, Apr 10 2013. 01 12 AM IST
Kolkata/New Delhi: The heat over the poor quality of coal supplied by Coal India Ltd (CIL) continues to increase, with NTPC Ltd trying to solicit the support of the states in its fight against the government-owned monopoly coal miner.
The states are involved because they buy power from NTPC, India’s largest power producer, which passes on the price of the fuel to them. And some of them also own power generating utilities that buy coal from CIL.
“We have written to the states. While it may seem like we are garnering support, one must understand that even they are facing the same difficulty,” said an NTPC executive who did not want to be identified.
Malay Kumar De, principal secretary, department of power and non-conventional energy sources in the West Bengal government, confirmed receiving NTPC’s communication. Both De and Orissa’s energy secretary Pradeep Jena said they supported the power generator’s position.
An NTPC spokesperson said the company is yet to receive an official response from the states.
“I fail to understand why have the quality issues cropped up now after we increased supply to NTPC,” S. Narsing Rao, chairman of CIL, said. It is “indeed a concern” if NTPC joins hands with other coal consumers against the miner, he said.
NTPC has been sparring with CIL over the poor calorific value of coal being supplied. Calorific value refers to the amount of heat that can be generated by burning a certain amount of fuel.
Typically, the calorific value falls when the fuel is of poor quality or has impurities (which means more of it will need to be burned to generate heat, and, consequently, electricity).
NTPC claims that while it is being charged for coal with a calorific value of 5,000 kcal/kg it is getting that with a calorific value of 3,500 kcal/kg. It has held back payment of Rs.2,000 crore to CIL on this account and denies owing any money to the miner. Mint couldn’t independently verify NTPC’s claim on the quality of coal.
CIL has denied NTPC’s charge on the quality of coal, although it has refused to accede to the power generator’s request for quality checks at the point of delivery. Such checks are currently performed at the point of loading and involve the participation of a team from NTPC. Most coal is transported by rail.
After NTPC held back its payments, CIL temporarily suspended supply to the power generator, but restarted it after coal minister Sriprakash Jaiswal’s intervention. Still, a further disruption can’t be ruled out.
The genesis of the fight between NTPC and CIL goes back to the beginning of the 2012 calendar year when the miner moved to pricing based on gross calorific value (GCV).
In the year ended 31 March, CIL missed its production target of 468 million tonnes (mt) by 12 mt although output increased 5.8% year-on-year. It failed to meet production targets in the preceding two fiscal years as well, although output did increase.
If NTPC’s claim is true, it would mean that at least some of this increase has come at the cost of quality.
The quality of Rajmahal coal under CIL’s subsidiary Eastern Coalfields Ltd has not changed in decades while its price fell from Rs.870 to Rs.640 a tonne after the transition of the grading system to GCV, CIL’s Rao said. “Then why is the quality issue raised now?” he said.
NTPC wrote to the states last week that they had been charged for electricity as per GCV of the coal received by NTPC at its stations.
Also, the utility has said that due to the curtailment of coal supplies, power generation may get impacted, which in turn will affect the electricity supply allocated to the states. In its communication, NTPC has also said that the state-owned utilities may also be receiving the same quality of coal and has advised them to have it checked and take appropriate action.
“The issue of coal quality needs to be addressed. CIL being a monopoly coal supplier is getting away with it. While we are billed for a higher GCV of coal, we don’t get it,” West Bengal’s De said. “We will present a joint front along with NTPC. The issue raised by NTPC is pertinent. Withholding of payments to CIL is a possibility. It can work if a united stand is taken by everyone. We have to take a decision on the same. While not immediately, probably we may do that.”
“States should join hands with NTPC. While we are being billed for 3,300 GCV, we are getting coal with a GCV of 2,790. CIL being a monopoly supplier is doing this. We will be joining hands with NTPC,” added Orissa’s Jena.
This united front is unlikely to worry CIL.
India is short of coal and there is a huge demand for the fuel, particularly from the private sector. Power projects, most of which are fuelled by coal, have been the worst hit by a shortage of the fuel. The power sector is the biggest consumer of coal, absorbing 78% of domestic production.
Mint reported on 9 April that all the extra coal CIL will produce this year will go to power companies.
“For the states to withhold payment to CIL is a tall order,” said a second NTPC executive, who did not want to be identified.
India has a power generation capacity of 214,630 megawatts (MW). Of this, 123,700MW is coal-based. Coal demand in India is expected to grow from 649 mt a year now to 730 mt a year in 2016-17, making the country heavily dependent on more expensive, imported coal, given that the projected local availability is only 550 mt per year.
“Coal India is a monopoly. No one wants to take it on as everyone wants coal,” added the first NTPC executive.
NTPC has also refused to sign supply agreements with the miner, citing issues with the quality of the coal. CIL had threatened to stop supply to NTPC if its payments, halted because of quality issues, are not cleared.
State-owned CIL has been seeking to counter criticism of its inability to meet domestic demand and plans to deliver all the extra coal it will produce this year, and for the coming few years, to power companies.
It argues that in line with long-term supply contracts, it is required to appraise the quality of coal “at the point of loading” through “joint sampling” with buyers.
CIL will stand its ground and continue to sample coal only at the mines, Rao said.
Experts said industry and customers could suffer the collateral damage in the fight between the two state-owned companies.
“This controversial situation does not augur well for India, which is facing coal shortage of close to 20%, since domestic coal production is not in sync with the increasing demand,” said Amol Kotwal, associate director (energy and power systems practice) for South Asia and the Middle East at consulting firm Frost and Sullivan.
Mint reported on 19 November that NTPC had charged CIL with inflating fuel bills. NTPC is capable of generating 41,184MW of electricity with 16 coal-fuelled projects. The country’s largest coal consumer, NTPC has an annual requirement of 160 mt, of which it imports around 16 mt.
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First Published: Tue, Apr 09 2013. 11 45 PM IST
More Topics: Coal India Ltd | CIL | West Bengal | Orissa | NTPC |
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