Power crisis biggest challenge for Modi govt

Blaming Coal India is the easiest way out but the reasons for coal crisis goes much beyond

Narendra Modi led government is likely to face its first serious test on governance over the next few weeks. The country is literally sitting on a power crisis time bomb with 56 thermal power plants sitting on less than a week’s inventory of coal. Last week the number of power units with such low level of fuel inventory was 52. According to Central Electrical Authority (CEA) out of the 100 power plants that it monitors, 27 of them have less than four days of coal. The northern region is already facing a shortfall of 5,000 MW as power companies are unable to generate more electricity.

 

Coal shortage is already creating a panic situation in the power ministry. Power minister has started blaming everyone including the past government, Coal India, rains and imports for the current crisis.

 

On wednesday, the minister met representatives of five states which are reeling under coal shortage, but nothing seems to have come out of it. This is because the two power companies which supply to these states – Adani Power and Tata Power have also met the minister seeking an early resolution in the compensatory tariff matter. But the government has no locus standi on compensatory tariffs since the power purchase agreement (PPA) is between the states and the companies. These are only governed by the terms and conditions laid down in the PPA.

 

After the meeting, the minister said that he would look into clearing coal supply bottlenecks and ramping up production. Goyal said “Coal has been supplied as per schedule to all plants. Because of the delayed monsoon, hydel power was not produced to the extent it should have been. To make up for that, coal-based production of electricity was increased by nearly 20 percent in June and July” Goyal said.
 

Higher plant load factor (capacity utilisation) by power plants resulted in the supply side logistics going in for a toss. Earlier, speaking to Business Standard, Coal India (CIL) which accounts for 80 per cent of India’s coal production, has clarified that it is not to be blamed for stocks at power plants dropping to critical levels.

 

A CIL official has been quoted as saying that “One should not forget CIL’s commitment is only for 65 per cent of the total requirement of new plants and 90 per cent of old plants, failing which the penalty clause should apply. But there has been no case in which CIL will have to pay a penalty. In some cases, the PLF is about 100 per cent, even at new plants.”

 

Increase in electricity production of these units has caught the government completely unawares. As the same CIL official says, “There is no solution against low stocks in these plants, as they will get domestic coal only to the extent of 65 per cent of the total requirement, according to the fuel supply agreements. Plants are running at 100 per cent PLF, against the normative 85 per cent; also, they haven’t arranged for imported coal.”

 

If power generation has moved from hydel plant to thermal ones, it was the responsibility of the government to ensure that the units are stacked with coal. Blaming Coal India and rains is an excuse for bad planning.

 

Imports could have been used to meet the supply shortfall. But even now the government does not seem to have woken up to the ground realties. The same report says that CIL was supposed to increase its imports to meet 80 per cent requirement of new plants from the current level of 65 per cent on a cost plus basis. But not many power plants have shown interest due to which the requirement for import has been brought down from five million tonne to less than one million tonne. The difference could be because the power plants would not like to import higher cost coal, in which case, given the emergency of the situation government could have facilitated some mechanism so that the power crisis could be managed.

 

A key meeting of power ministers from all states on September 9 in New Delhi is expected to take up the issue of coal shortage and tariff disputes; hopefully we may see some measures to ensure long term resolution.