Coal India may turn power producer as stocks pile up

State-owned Coal India Limited (CIL) may set up power plants to use the dry fuel piling up due to limited availability of rolling stock to carry supplies to utilities.

CIL has stockpiles of roughly 53 million tonnes (mt) as of today and a 500-Mw power plant normally consumes 2.5 mt of coal a year in India.

“In the event the problem of moving coal persists, we may think about it, as our stockpiles are increasing,” said CIL Chairman Partha S Bhattacharya.

Adding: “Although, we do not think it is a very great policy for us to get into power generation because so many people are already present in it. Also, it is not our core area of competence.” He said “the idea is still in the air”.

In April, CIL had signed an agreement with state-run power producer NTPC for setting up two 2,000-Mw power plants at an estimated investment of over Rs 16,000 crore.

CIL is likely to launch its initial public offer (IPO), billed as the country’s largest ever, on October 18 to raise up to Rs 15,000 crore. The government has set a target of raising up to Rs 40,000 crore by selling stakes in major public sector units this financial year.

India produces around 500 mt of coal annually, which falls short of demand by roughly 50 mt. Limited availability of railway wagons to transport the dry fuel from ports is a constraint for meeting the demand-supply gap through imports.

Bhattacharya also said the company would float a tender for importing 6 mt of coal for NTPC by December.

He said the company was planning to invest heavily to set up projects for washing coal to increase its calorific value. CIL will set up 20 washeries to wash 111 mt of coal in the next five years. “Our average price for coal is $21 per tonne. After washing, I will create my product at $27 per tonne,” he said. High quality coal in the international market fetches around $45 per tonne. “I would still earn my margin.”