Sign coal supply pacts soon: Shinde

Undeterred by supply constraints, the power ministry has assured Prime Minister Manmohan Singh of capacity addition of 18,000 Mw in 2012-13. The ministry, however, said Coal India (CIL) should sign fuel supply agreements (FSA) soon, and accordingly, supply coal to power producers.

Power Minister Sushil Kumar Shinde, who was present at the meeting on the infrastructure sector called by the prime minister, told Business Standard, “During the meeting, 18,000 Mw of capacity addition was proposed. Give me coal and gas, and we will cross the 18,000 Mw target by the end of the current financial year. In 2011-12, the concluding year of the 11th Plan, more than 20,000 Mw of capacity was added.”

Shinde, however, said CIL should expedite the signing of FSAs, crucial for assured availability of coal to power generating companies. The power ministry has been insisting if CIL found it difficult to meet the mandated minimum supply level of 80 per cent, it should at least supply 65 per cent of the committed coal. However, CIL has indicated supplying 80 per cent of the committed coal was not possible, saying it could supply only up to 60 per cent.

It added it would raise this to 80 per cent in four years.

Shinde recalled the Planning Commission had scaled down the capacity generation target for the 11th Plan to 62,000 Mw, against the original target of 78,700 Mw. “Ultimately, more than 55,000 Mw was achieved by the end of the 11th Plan. Had adequate gas been received, another 8,000 Mw of generation capacity could have been added.”

Despite these challenges, the power sector is poised to meet the 18,000 Mw target for 2012-13, and this can even be exceeded, provided the sector receives sufficient fuel," he said.

He added his ministry had made a case for pooled import of coal to address the rising mismatch between demand and supply. Through this arrangement, states would be given imported coal proportionate to their coal deficits.

On the availability of funds to ailing distribution companies, Shinde said he had received several complaints from distribution companies of banks rejecting funds to them. “I took up this issue during the meeting convened by the prime minister. It was decided the principal secretary to the prime minister would look into this and find a way out so that these companies can secure funds from banks," he said.

Of late, banks have expressed concern on their exposure to distribution companies. CRISIL had, in a recent report, estimated losses of distribution companies might have risen to Rs 35,000 crore by the end of 2011-12, compared with Rs 27,500 crore in 2009-10.