Indonesia coal import issue puts R-Infra UMPP on hold

Indonesia coal import issue puts R-Infra UMPP on hold

Mumbai: Anil Ambani-promoted R-Power on Thursday said that it will “pause" before starting work on the ultra mega power project (UMPP) it is building at Krishnapatnam in Andhra Pradesh till issues over the price of coal imports from Indonesia is resolved.

The fate of a slew of power projects in the country hangs in the balance due to a change in stance adopted by the Indonesian government, mandating that coal mined in the country should be sold at international market prices.

A number of Indian power producers have either procured coal assets in Indonesia to secure the fuel at competitive prices, or have entered into long-term and spot contracts to import coal.

R-Power has acquired captive coal mines in Indonesia and agreed to develop the mines and associated infrastructure. In January, it said it will invest $5 billion (Rs 22,650 crore) in Indonesia.

The new mandate has pushed up Indonesian coal cost, threatening the feasibility of Indian projects there.

“The pricing of imported coal is a factor impacting the entire power sector in the country," R-Power chief executive Jayarama Prasad Chalasani said. “Since Krishnapatnam is yet to take off the ground, we are taking this opportunity to pause and wait till the issue is resolved."

The 3,960MW UMPP at Krishnapatnam was to be commissioned in 2013. Whether the project will overshoot the timeframe for its commissioning will depend on the time taken to solve the matter, Chalasani said. The project entailed an estimated cost of Rs17,450 crore.

Earlier this week, Tata Power Co. Ltd wrote to the ministry of power stating that the UMPP it was building in Mundra had become financially unviable because of the higher cost of coal. In July, JSW Energy Ltd said it was deferring its plan to expand a thermal power project in Ratnagiri due to expensive imported coal.

“The dependence on imported coal will only grow in coming days as the expected shortfall of coal available domestically for the power generation targets till 2017 could be 25%," said Kameswara Rao, executive director and India utilities leader at audit and consulting firm PricewaterhouseCoopers.

Around 12% of India’s coal requirement is imported.

Chalasani said one possible solution to the deadlock was an intervention by the Indian government, as power producers had tried negotiating with the Indonesian government without much success.

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