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68,000MW projects face a blackout

68,000MW projects face a blackout
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First Published: Tue, Sep 09 2008. 11 20 PM IST

Updated: Wed, Sep 10 2008. 09 40 AM IST
New Delhi: Electricity projects capable of generating a combined 68,000MW, almost half the country’s installed capacity, have been put at risk because of the government’s failure to assure coal supplies to the so-called independent power producers, or IPPs, developing them.
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Bankers will not approve loans for the projects in the absence of assured coal supplies, delaying the financial closure that is needed for the developers to order equipment and begin work on the projects.
Even intervention by the Prime Minister’s Office has failed to break the logjam. This is because the power-short country does not have sufficient coal reserves to meet galloping demand.
Although India has an installed power generation capacity of 143,000MW, the actual generation is only around 100,000MW. Around 67% of this installed capacity is based on coal. A significant portion of this thermal power capacity has been affected by non-delivery of promised coal supplies.
“Various meetings have already taken place between power and coal ministers, the Prime Minister’s Office and the Planning Commission,” said a government official on condition of anonymity. “What has emerged from these meetings is that there is no coal and, hence, no linkages can be provided to these IPPs.”
These IPPs are not classified as utilities such as state-owned NTPC Ltd or NHPC Ltd.
Also see: Fuel shortage (graphic)
Most of IPPs that are unable to secure coal supplies are located in Chhattisgarh, Orissa, Andhra Pradesh and Madhya Pradesh, and they had applied in the past year for the so-called coal linkages that would give them an assured supply of the fuel.
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“This is a major crisis. While the IPPs that had earlier applied for coal have been given linkages, the new applicants— over the past one year—cannot be entertained,” the same government official said.
Currently, IPPs in the country have a power generation capacity of around 20,000MW based on fuel sources such as coal, gas and water.
“All IPPs are going to be in a limbo. Coal linkage is the heart of a project,” said a Hyderabad-based IPP developer, who didn’t wish to be named because he is still awaiting part of the coal linkages he had been promised. So far, the developer has incurred a cost of Rs100 crore, which will be forfeited if the company is not able to achieve financial closure.
Coal shortage is a major cause of worry because it may lower power generation and, thereby, growth in the domestic economy, which grew by 9.6% last fiscal year and is expected to expand by around 8% this fiscal.
To generate 1MW of power, around 5,000 tonnes of coal per annum is required.
India has 256 billion tonnes of coal reserves, of which around 455 million tonnes per annum, or mtpa, is mined. The country currently imports around 40mt of coal. To make matters worse, of 187 captive coal blocks allocated to the private sector having gross reserves of 41 billion tonnes for mining, only 20 have started production.
“However, the majority of these blocks, amounting to around 100, have only been allocated in the past two-three years. The 20 blocks that have started production are producing around 30mtpa,” a senior coal ministry official said, asking that he not be named.
Santosh Bagrodia, minister of state for coal, said: “Taking away the blocks from these private sector developers is not the solution. We should evolve ways and means to increase coal production.”
Domestic coal demand is expected to touch around 2 billion tonnes a year by 2031-32, about five times the current rate of extraction with the maximum demand coming from the power sector.
State-owned Coal India Ltd, or CIL, the country’s largest coal mining company, has a coal output of 380mt and plans to increase it to 405mt by 2009-10.
Some coal suppliers are reneging on their commitments because they have not commenced production—in some cases because their coal mines haven’t received environmental clearances.
“The reasons for slow progress in coal linkages are concerns regarding supply capacity enhancement as well as transportation network constraints,” said Dipesh Dipu, principal consultant, mining, with audit and consulting firm PricewaterhouseCoopers.
“Also, part of the demand as well from the not-so-serious players appears emanating from an immediate follow-up transaction opportunity at a premium, in which case it may become difficult to assess the real demand for coal,” he said.
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First Published: Tue, Sep 09 2008. 11 20 PM IST