Power firms cry fuel shortage but don't lift emergency coal supply

Take less than 2 mt of the 30 mt offered by CIL

Even as power companies have been complaining about a severe fuel shortage, they have failed to lift the extra coal offered to them by Coal India Ltd (CIL) from its stocks as emergency relief on the government’s instruction. Experts say the companies could be using the inflated perception of coal shortage to create grounds for price pooling, to source imported coal at cheaper rates.

CIL had in June invited expressions of interest from power plants to lift coal from its pithead stocks on an ‘as is where is’ basis, with conditions of fuel supply agreements applicable. “This scheme was intended to make sure the power sector got additional coal. However, against a total offer of 30 mt, only around 1 mt was booked by power stations till October. Even today, not more than 2 mt has been lifted,” a senior CIL executive told Business Standard.

Experts say the situation might have been working in favour of power firms. “While these companies do have a shortage issue, I won’t rule out that they might be using it for lobbying to get imported coal at cheaper rates,” said Amrit Pandurangi, senior director, Deloitte. He, however, added factors like quality of coal offered and consistency of delivery also played a major role in such situations.

AN ARTIFICIAL SHORTAGE?

Sep ’11: Power firms raise concerns over coal shortage. The power ministry says half of 89 power stations left with critical coal stocks of less than 7 days

Oct ’11: Coal ministry announces plan to divert 4 mt coal from e-auction to long-term consumers under FSAs

Nov ’11: CIL says power companies did not lift even a tonne of the 5 mt e-auction coal offered

Feb ’12: Heads of power firms meet the PM, FM, Planning Commission deputy chairman, power minister and coal minister; apprise them of coal shortage. PMO asks CIL to increase committed supply  from stocks

Jun ’12: CIL offers 30 mt to power companies from stocks

Aug ’12: The delegation again meets power minister, presses for immediate solution to the shortage

Nov ’12: CIL informs the Planning Commission only 1 mt of the 30 mt coal from stocks offered to power companies has been lifted

Even the small quantity of coal lifted was by private firms like Adani Power and Reliance Power (for its Rosa plant in UP), while state-run companies did not lift any. “Power firms are willing to pay higher rates for imported coal but they will not accept cheaper domestic coal, making consumers pay for their lack of accountability as fuel cost is a pass-through,” the CIL executive said.

Power firms said two factors deterred them from lifting extra coal — suspect quality and transportation cost. “In addition to higher cost, arranging transportation for lifting coal from pithead becomes a major problem. We have to arrange road transportation by local truckers in such cases. Our plants are designed for easy railway loading,” a senior NTPC executive said. Private industry agreed. “Until the issue of high prices due to transportation cost is resolved, private firms will be reluctant to pick coal,” said Ashok Khurana, director-general, Association of Power producers.