Large utilities to get priority on coal supplies

Large utilities to get priority on coal supplies

New Delhi: India will give so-called supercritical power projects a higher priority in getting scarce coal supplies, putting smaller utilities at a disadvantage, as the government seeks to meet burgeoning demand in the world’s fastest growing economy after China.

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“We do not want small players," Union power secretary H.S. Brahma told Mint. “We are only looking at large players who have plans to set up large capacities as it will help in increasing the power generation capacity of the country."

The coal linkage policy for the proposed 12th Plan period (2012-17) will give supercritical projects, which generate 660MW and more, a 20% weightage. The higher capacity helps generate increased plant efficiencies and economies of scale, besides being environment-friendly.

The preference is aimed at helping the country launch a supercritical power programme along the lines of similar efforts in the US, Japan, Germany, South Korea and Russia. The policy will also help the large power projects of companies such as Anil Ambani-owned Reliance Power Ltd, Tata Power Co. Ltd, Adani Power Ltd, CLP Power India Pvt. Ltd, Lanco Infratech Ltd, Indiabulls Power Ltd and Jindal Power Ltd.

The Central Electricity Authority (CEA), India’s apex power sector planning body, endorsed the ministry’s view.

“Of around 74,000MW coal-based capacity proposed during the 12th Plan, close to 60% of projects plan to use supercritical technology," said a senior official who didn’t want to be identified as he’s not authorized to speak to the media. “The balance (around 30,000MW), which plan to use subcritical technology, will get affected as there is a very limited possibility of them getting coal linkages."

India has a power generation capacity of 152,360MW, of which 52.8%, or 80,395.88MW, is coal based. The country plans to add a total of 100,000MW capacity during the 12th Plan.

The preference for coal linkages will be assigned according to a points system, with a maximum of 100. Projects using supercritical technology will get 20 points. Of the remaining 80 points, as much as 50 will be based on the status of land acquisition, 20 for projects located at pit heads and the balance for generation plants using sea water instead of fresh water.

India doesn’t have sufficient coal reserves to meet the galloping demand for power. To generate 1MW of power, around 5,000 tonnes of coal per annum is required. The country has 256 billion tonnes of coal reserves, of which around 455 million tonnes per annum (mtpa) is mined.

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.

“There is hardly any coal available," Brahma said. “This weightage will help in establishing supercritical technology in the country."

An energy sector expert called for market-oriented solutions.

“Coal produced as well as reserves in the blocks are being rationed and they result in such inconsistencies. This dichotomy is stark as India also boasts of a large resource base," said Dipesh Dipu, principal consultant (mining) with audit and consulting firm PricewaterhouseCoopers. “A market-oriented approach that checks excessive pricing and rent-seeking behaviour may provide a good framework for coal mining in India."

Some large developers welcomed the move by the government as part of efforts to curb environmental damage.

“We in CLP look at the sub versus supercritical debate purely from the point of view of the threat of climate change from CO2 emissions rather than a large versus small developer angle," said Rajiv Mishra, managing director of CLP Power. “We will not build subcritical coal-fired power plants, and believe no one else should. We should move towards supercritical and, in due course, ultra-supercritical (USC) technology, to reduce the carbon intensity of generation."

Questions emailed to Reliance Anil Dhirubhai Ambani Group, Tata Power, Lanco Infratech, Indiabulls Power and Jindal Power had not been answered at the time of filing this story. An Adani Power spokesperson did not respond to phone calls or to a message left on his cellphone.

CLP’s Mishra said the effect on power producers not in the supercritical category would be minimal.

“I think there are an extremely small number of 250-300MW coal-fired projects being built in any case, and the difference in the capital cost between 500MW subcritical and 660MW supercritical units is not that much," the CLP managing director said.