New Delhi: India’s biggest electricity producer plans to fuel a proposed power project on the country’s southern coast with domestic coal, switching from its original plan to use overseas supplies equivalent to almost 9% of this year’s forecast imports.

The state-owned company NTPC Ltd made the decision after the federal power ministry and the state government of Andhra Pradesh, where the 4,000 megawatt Pudimadaka project is located, asked it to scrap plans, NTPC technical director A.K. Jha said. The project may cost about 24,000 crore ($3.6 billion), based on Bloomberg calculations using an estimate of 6 crore per megawatt.

India’s coal supply situation has reversed since 2014, when the plant was proposed as the company’s first to be powered completely by overseas supplies. State miner Coal India Ltd, the world’s biggest producer of the fuel, has since increased output faster than the country’s consumption. While lower Indian imports spell bad news for seaborne coal prices, adequate domestic supplies have helped the nation’s power producers save costs and avoid the risks of price and currency fluctuations.

India’s coal purchases from overseas declined 8% in the year ended March 31 to 199.9 million tonnes, according to the coal ministry, amid record domestic production. Overseas purchases are expected to decline to 160.16 tonnes this financial year, Piyush Goyal, minister for coal and power, told parliament on 18 July.

Falling imports

Imports at New Delhi-based NTPC, which consumes about a third of the coal India produces, declined 42% to 9.45 million tonnes in the year ended 31 March, it said in a presentation on 30 May. Its imports may drop to 6 million tonnes this fiscal year.

“We have asked NTPC to give it a rethink," federal power secretary Pradeep Kumar Pujari said, referring to the Pudimadaka project. “The logic is when we have plenty of coal available in the country, there’s no point depending on foreign coal. Using our own resources is the government’s broad guideline on energy security."

Over the past two years, NTPC called for bids from equipment suppliers and to buy 14 million tonnes of imported coal annually for 10 years. No order has been awarded. The project was expected to start operations in the year starting 1 April, 2018.

“We have agreed that the Pudimadaka project should use domestic coal rather than imported coal," Andhra Pradesh energy secretary Ajay Jain said by phone. “We have asked the coal ministry for a suitable linkage for a higher grade coal matching imported coal."

If coal isn’t available domestically to meet the plant’s original requirements, NTPC may need to reissue equipment tenders with new boiler specifications, Jha said. Bloomberg