New Delhi: In a move that raises questions on the uniformity of policies regarding coal supply for large power plants that India wants set up, an arm of the government says that a change in rules made last month by a group of ministers applies only to one such plant being developed by the Reliance-Anil Dhirubhai Ambani Group, or R-Adag.
That the change made by the ministerial group (also called empowered group of ministers, or eGoM, because decisions taken by it need not be ratified by the cabinet and are binding) was an exception was made clear by the Central Electricity Authority, or CEA, during a late-August conference with eight companies, or consortia, that are bidding for a power plant at Tilaiya in Jharkhand.
In response to a question from one of the firms, Tata Power Co. Ltd, CEA said surplus coal from the blocks meant to supply the fuel to the Tilaiya plant could not be used to power other projects.
“The Tata Power representative raised the issue of whether the successful bidder for the Tilaiya project will be allowed to use surplus coal from the captive coal blocks allocated for the Tilaiya project for its (the successful bidder’s) other projects. The CEA representative said that there was no such proposal,” said a senior government official familiar with the proceedings at the meeting who did not wish to be named.
In August, the ministerial group had allowed Reliance Power Ltd, or RPL, part of R-Adag, which is developing a power plant at Sasan in Madhya Pradesh, to use surplus coal from the captive blocks meant to feed this plant in its other projects.
At the time, the decision looked like a change in policy governing a certain type of large power plants, but CEA’s clarification makes it clear that it was an exception.
Shubhranshu Patnaik, executive director at audit and consultancy firm PricewaterhouseCoopers, said there “should be a policy around the disposal of surplus coal which applies to all UMPPs, not just Sasan or Tilaiya”.
RPL and Tata Power did not respond to emailed queries.
Tata Power’s query on the use of surplus coal becomes significant given the shortage of the fuel. A company that knows it can use extra coal from blocks meant for one project in others will likely lower its bid for the first project. Power projects are usually awarded on the basis of bids listing the unit cost of power generated by the plant. The winner is the company that quotes the lowest rate.
The plants at Tilaiya and Sasan are part of several large power plants, each with the capacity of 4,000MW, that the government wants developed. To encourage companies to bid for these projects, the government sets up a company for each project, starts the land acquisition project, identifies and allots captive coal mines that can supply fuel in some cases and then transfers this company to the successful bidder. Bids for three such power plants, at Sasan, Mundra in Gujarat, and Krishnapattnam in Andhra Pradesh have already been awarded to RPL (Sasan and Krishnapattnam) and Tata Power (Mundra).
These plants are called ultra mega power plants, or UMPPs, by the government and those that are located near coal mines (also called pithead projects) are allotted captive coal blocks. Those that aren’t are located near ports because they will have to ship in coal.
The late-August meeting with bidders was attended by companies such as Tata Power, RPL, Larsen and Toubro Ltd, China Light and Power, and NTPC Ltd. Representatives of CEA, India’s apex planning body in the power sector, and Power Finance Corp., the agency responsible for UMPPs, were also present.
The ministerial group, on 14 August, decided to allow RPL to use the surplus coal from the Sasan project in other projects being developed by the company.
The meeting was the first held by the group after a 22 July trust vote that the ruling United Progressive Alliance government won, largely on the back of support extended by the Samajwadi Party.
The party’s leader Amar Singh is considered close to Anil Ambani, chairman of R-Adag.
A CEA official said the clarification regarding Tilaiya merely reiterated existing rules governing such projects.
“There was no such proposal to use surplus coal from captive blocks (meant) for one project to power another even in the case of Sasan UMPP,” added this official who did not wish to be named. A senior official in the power ministry said bid conditions “for Tilaiya and Sasan were the same”.
“We still do not know if there is surplus coal at Sasan.”
Bids for the Tilaiya project is expected to be opened in November and the deadline for the award of the project is 31 December. The plant may require around 14 million tonnes per annum, or mtpa, of coal for a period of 25 years. The coal will be from Kirandhari B and C coal blocks of North Karanpura coal fields. The geological reserves for the coal blocks are expected to be around 972 million tonnes.
“With the amount of coal involved in the Tilaiya project, it is more of mining project than a power project,” said PricewaterhouseCoopers’ Patnaik.
UMPPs are critical to the government’s efforts to enhance the country’s power generation capacity. Currently, India has a power generation capacity of 143,000MW and it expects to add generating capacity of 78,577MW by 2012. After Tilaiya, the government will award projects at Cheyuur in Tamil Nadu, and Munge in Maharashtra. The request for qualification (or RFQ) applications for these two projects are expected to be issued by March 2009.