States will be told to offer coal blocks for competitive bidding

States will be told to offer coal blocks for competitive bidding
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First Published: Tue, Jan 13 2009. 11 38 PM IST
Updated: Tue, Jan 13 2009. 11 38 PM IST
New Delhi: India’s Central Electricity Authority has asked for a meeting of all states on 19 January to urge them to utilize alloted coal blocks by offering them for competitive bidding for power generation.
The country’s top power sector planning agency is worried that a failure to move quickly could jeopardize several proposed coal-based power projects.
“We are making this plan for the 12th Plan period (2012-17) as the coal ministry has made it pretty clear that it will not give any fresh linkages,” said a senior official at the authority, who didn’t want to be named. “We do not want the resources to be wasted.”
Captive coal blocks for power generation are given out by the coal ministry.
States with a large number of captive coal blocks include Andhra Pradesh, Orissa and Chhattisgarh.
The states, together with private sector companies, have been allocated captive coal blocks with at least 6 billion tonnes, or bt, of reserves, which have a potential to generate 100,000MW of electricity.
India has an installed power generation capacity of 145,000MW and plans to add 78,577MW by 2012. Of this, around 46,600MW is expected to come from coal-fired plants.
The coal ministry has rationed out access to coal blocks, implying that some power plants planning to start operations by 2012 will not have assured supplies and might have to import coal.
To make matters worse, of 187 captive coal blocks allocated to private firms for mining that have estimated reserves of 41bt, only 20 have started production.
The coal ministry has threatened to cancel exploration licenses for those who have failed to execute promised plans.
The government would not be able to meet a projected demand for about 730 million tonnes, or mt, of coal a year by 2012, unless 100mt of the fuel is imported.
“Competitive bidding for coal block allocation for captive mining may lead to transparency and objectivity in the process, and may also have built-in commercial incentive for quicker project implementation,” said Dipesh Dipu, principal consultant, mining, with audit and consulting firm PricewaterhouseCoopers Inc..
“However, the evaluation criteria of lump sum payment or profit-sharing may need to be prudently examined as these may have escalating impact on the cost of mining,” he said. “A balanced approach alone may see improvement in the investment environment in coal mining.”
The so-called coal linkage means a coal-fired power plant is assured supply, which requires approval from a committee headed by the coal ministry.
Scarce resources and increasing applicants prompted the government to introduce a system of awarding letters of assurance.
These letters are converted to linkages after a project completes financial closure, which occurs when the promoters make legally binding commitments to mobilize funds.
To generate 1MW of power, around 5,000 tonnes of coal is required every year. India has 256bt of coal reserves, of which around 455mt is mined every year.
The country currently imports around 40mt of coal.
Domestic coal demand is expected to touch around 2bt a year by 2031-32, about five times the current rate of extraction, with the maximum demand coming from the power sector.
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First Published: Tue, Jan 13 2009. 11 38 PM IST