Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Politics / News/  Coal, power ministries lock horns over fuel
BackBack

Coal, power ministries lock horns over fuel

Coal, power ministries lock horns over fuel

In deficit: Coal suppliers are reneging on their commitments as they have not started production in their mines, say analysts and officials.Premium

In deficit: Coal suppliers are reneging on their commitments as they have not started production in their mines, say analysts and officials.

The Union power ministry has opposed a move by its coal counterpart to ration out access to what it believes is a limited number of coal blocks, implying that some power plants planning to start operations by 2012 will not have assured supplies and might have to import coal.

In deficit: Coal suppliers are reneging on their commitments as they have not started production in their mines, say analysts and officials.

It could also upset the power ministry’s plans to produce more electricity in the country as quickly as possible.

“We have made it pretty clear to the coal ministry that the linkages should be provided to all the units," said a power ministry official, who did not wish to be identified. The so-called linkage means a coal-fired power plant is assured of supply, which requires approval from a committee headed by the coal ministry.

The committee is yet to discuss such coal linkages for the power and cement sectors although a meeting was scheduled on 7 April. It is expected to consider linkages for around 20 independent power producers that would add capacity to generate 15,000MW of energy in the 11th Plan that ends in 2012.

Earlier, power projects were directly awarded coal linkages. However, scarce resources and increasing applicants prompted the government to introduce a system of awarding letters of assurance, or LoAs. These letters are converted to linkages after a project completes financial closure, which occurs when the promoters make legally binding commitments to mobilize funds.

Still, coal production has been unable to match demand, resulting in some LoAs not being converted to linkages. “Delays in coal linkages will certainly impact the investment environment in the as it may make fuel security doubtful and consequently, financial closure difficult. This will certainly have negative impact on generation targets," said Dipesh Dipu, a manager with audit and consulting firm PricewaterhouseCoopers. “There have been delays in project sanctioning as well as implementation, and in view of the fuel supply agreement regime, new linkages may mean commitment from the coal producers, which they may find difficult to keep."

The coal ministry has issued LoAs of around 200 million tonnes per annum, or mtpa, in line with India’s coal distribution policy, which says the demand of the power sector has to be fully met. However, there is no coal available to cater to these LoAs.

Coal suppliers, say analysts and officials, are reneging on their commitments because they have not started production in their mines; in some cases because they have not received environmental clearances. “There are very serious problems in coal mining. Land acquisition problems, delays in environment and forest clearance have delayed the coal mining plans," said a coal ministry official, who requested anonymity.

According to India’s economic survey for 2007-08, growth in coal production has dropped from a high of 6.2% between April and December 2006 to 4.9% in the same period in 2007. The country has an installed power generation capacity of 141,080MW and plans to add 78,577MW more by 2012. Of this, around 46,600MW is expected to come from coal-based projects.

Around 67% of India’s electricity production capacity is based on coal. The power sector currently needs around 390mtpa of the fuel. Even though 78% of the coal produced in the country is used to generate power, projected supply falls well short of demand.

The energy sector, excluding the planned 4,000MW power projects, is expected to need 545mtpa of coal by 2012, compared with domestic coal supplies of around 482mtpa. The shortfall will have to be made up through imports.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
Catch all the Politics News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 28 Apr 2008, 12:16 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App