Coal linkage criterion may hit power capacity addition target

The environment ministry’s continued tirade against infrastructure projects could take a toll on the power capacity addition target under the 12th Plan. Months before the Plan period begins in April next year, the power ministry has cautioned against slippages, thanks to the environment ministry’s latest decision to reject projects without firm coal linkages.

The decision was conveyed through a recently-issued circular that said all proposals for power, steel and sponge iron, among others, requiring coal as a raw material, would be considered only after firm coal linkage was available and the status of environment and forest clearances for the coal source was known.

“The said circular needs to be amended and environmental clearances be accorded to all projects that have been granted coal linkages without insisting on the source of coal,” the power ministry said in a note, prepared as an input for a draft Cabinet note on coal shortages. “If environment clearances are not granted in 2011 for the 12th Plan projects, we may miss the 12th Plan capacity addition target, fixed by the Planning Commission,” it added.

The environment ministry’s circular is seen as a part of the ongoing activism that began with the ‘no-go’ policy last year and was followed by the Comprehensive Environment Pollution Index (Cepi) moratorium that put investments worth thousands of crores in danger.

“It is a serious matter. Construction work on projects can begin only after environment clearance is given. If a project has to come up in the 12th Plan, its construction should start by the end of this year or early next year,” said a senior power ministry official.

Ironically, the power capacity addition target for the next Plan period (2012-17) has not been finalised, and the working group for the 12th Plan has not yet met. India had missed its target to add 31,000 Mw in the 8th Plan by 52 per cent. In the 9th Plan, the target of 40,000 Mw was missed by 47 per cent and the 41,000-Mw target in the 10th Plan by 51 per cent. The target for the 11th Plan has been scaled down from 78,000 Mw to 62,000 Mw and the actual achievement is likely to be only 55,000 Mw.

The environment ministry’s logic behind the circular is to avoid cases where investments get stuck due to development of end-use projects without necessary environment and forest clearances in place. “It is, therefore, necessary that the status of clearances of the linked coal sources is ascertained in advance to avoid a fait accompli situation, besides public interest involved in preventing blockage of financial resources due to absence of raw material, i.e. coal,” the circular said.