17 independent power producers to forgo imported coal for domestic supply

Responding to the Centre’s new scheme to reduce import of coal, 17 independent power producers have applied to forgo their imported coal quantity, replacing it with supply from Coal India (CIL).

Adani Power, GMR Energy, Avantha Power, Lalitpur Power, and Vedanta are some of the private companies that have applied for the ‘import substitution’ scheme of the Centre.

These units totalling 22,450 Mw have cumulatively requested for 17.9 million tonne (mt) of coal from CIL to substitute their imported capacity. This quantity is over and above the amount of coal these units already get from CIL under the fuel supply agreement (FSA). Business Standard has reviewed the request details submitted to the government.

The power ministry in several notices to all gencos over the past month urged them to replace imported coal with domestic coal. “It is advised that all the gencos who are importing coal for blending purposes may make best efforts to replace their imports with domestic coal,” said the letter by the ministry in April.
 

 

Apart from stations built to operate on imported coal, many generating stations blend 8-10 per cent of their total coal requirement with imported coal. This is mostly done for operational purposes. At times, when domestic supply dwindles, gencos depend on import. However, the with power demand now witnessing record decline due to the lockdown and muted industrial growth, coal supply with CIL is in surplus.

“The coal stock available with the thermal power plants has reached an all-time high of 50 mt and the stock with coal companies stands at 70 mt. In this surplus situation, it is advisable to not import coal for blending purposes,” the ministry’s letter has stated. The ministry is aiming for zero coal import in this fiscal.

For the ‘Import Substitution’ scheme, a genco has to submit the amount of coal it is currently getting from CIL, the amount it is importing, which will be substituted through domestic supply, and the preferred subsidiary of CIL from which it wants the supply.

However, several gencos pointed out that CIL is unlikely to supply the same quantity as requested by them.

In the document accessed by the paper, against the requested amount of 17.9 million tonne, CIL would supply 15.9 mt and 11.8 mt respectively for either at trigger level of 80 per cent or at the ACQ level. Annual Contracted Quantity (ACQ) is the coal quantity tied up by genco with CIL and ‘trigger level’ is the lowest threshold of the ACQ.

“A genco today is anyway getting coal supply at 65-70 per cent of their ACQ from CIL. The ones who have applied for import substitution want coal supply over and above this. But CIL will be supplying the gap between their original supply amount and the quantity requested by the genco under the scheme. If there is surplus coal with CIL, trigger level should be 100 per cent and not 80 per cent,” said a senior executive of a leading power producers.

Another executive said the gencos having FSA with CIL do not want import substituted coal within the FSA quantity. He also said the units which can apply under this scheme are the ones which have some kind of FSA with CIL. “The scheme eligibility should be widened and all plants should be allowed irrespective of having FSA or not,” he said.

CIL produced 602.14 mt coal during the last fiscal year. However, the surplus coal produce of CIL came when electricity generation registered a record low, leaving little demand from the company's largest customers. Electricity generation fell by 6.5 per cent in March 2020. Also, barring first two months of 2020, power demand growth was in negative since September 2019.