New Delhi: With the current financial year drawing to a close, state-owned NTPC Ltd and Coal India Ltd are trying to resolve the 2,500 crore payment impasse over fuel supply.

Government officials and executives at the two listed companies fear that some amount of outstanding dues may have to be carried forward in the next fiscal year beginning 1 April.

“We are trying to resolve the pending payment issue. As of February end, NTPC owed us 2,500 crore. It has to be either shown as provided for or as receivables. It has to be done as per the accounting standards," a top Coal India executive said, requesting anonymity. “CAG (Comptroller and Auditor General of India) had asked us to resolve it at the earliest. We may have to forego some amount."

An NTPC executive, who also didn’t want to be identified, confirmed that the dues were pending but a 1,000 crore ad hoc payment was made earlier this year with the total outstanding left at 1,500 crore.

“The rush is to catch the deadline. However, it is a huge and exhaustive exercise because data needs to studied station-wise and region-wise. We don’t want to carry forward this amount. If we pay Coal India now, we can recover from the consumers. If we hold, then an interest may have to be paid on this amount," the NTPC executive said. “We are out trying our level best, but if something is left, it will have to be carried forward."

This comes with the CAG directing both the government-run companies to resolve the issue to avoid an accounting nightmare. India’s largest power generation utility had sparred with the world’s biggest coal miner over the poor calorific value of coal being supplied. The plan was to resolve this contentious issue within this fiscal year and meet the 31 March deadline.

Calorific value refers to the amount of heat that can be generated by burning a certain quantity of fuel. Typically, the calorific value falls when the fuel quality is poor or it has impurities. NTPC claims it was charged for coal with a calorific value of 5,000 kcal (kilocalorie) per kg, but was supplied with coal with a calorific value of 3,500 kcal per kg. It held back payment to Coal India on this account.

“It was decided that based on the findings of the third-party testing, the payments will be made. While the issue was resolved at NTPC’s last board meeting, the actual payment may be pending," said a government official aware of the development who also wanted to remain unnamed. “If its not done by the last of this month, then what can be done?"

The genesis of the fight between NTPC and Coal India goes back to the beginning of 2012, when the miner moved to pricing based on gross calorific value.

NTPC requires 166.7 million tonnes (mt) of coal in the current fiscal year to operate its power projects. Of this, while 150 mt is to be supplied by Coal India and Singareni Collieries Co. Ltd, the balance 16.7 mt was to be sourced from overseas.

The utility has the capacity to generate 42,964 megawatts (MW) of electricity with 17 coal-fuelled projects. The demand for coal will increase with the utility setting a target of becoming a 128,000MW power producer by 2032. Of this, 56%, or 71,680MW, will be coal-based.

Demand for the fuel in the country is expected to grow. Of India’s current capacity of 237,743MW, around 59% is fuelled by coal.

“India has a strong structural demand for coal given the country’s reliance on thermal power. We expect its thermal coal-based power capacity to increase from an estimated 123GW (gigawatts) at end-FY13 (fiscal year 2013) to around 150GW by FY16. Thereby, total coal demand could increase from around 720 mt in FY13 to 920 mt in FY16E (estimated). However, we expect domestic coal supply to only cater to 76% of FY16E coal demand, with the rest being met by imports," UBS Global Equity Research wrote in a 19 March report.

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