India's Rajasthan state saving over Rs. 17 K crore in mining costs

Even as power producers across the nation continue to complain about inadequate coal supplies, Rajasthan has been taking significant steps in ensuring fuel security to state-owned power projects by roping in a mining developer and operator (MDO) for the Parsa East and Kanta Basan Coal Block at Surguja in Chhattisgarh. This has proved to be a game changer.

The MDO model has kicked up efficiencies within the power sector value chain and kept tariffs under check.

More than a decade ago, in 2006, a far-sighted Rajasthan government achieved energy security for the Rajasthan Vidyut Utpadan Nigam Ltd, (RRVUNL), its power generating company, through allocation of captive coal blocks.

In a landmark decision taken then, the state government decided to outsource coal development and operational activity with a focus on delivering affordable and reliable electricity to customers.

That decision stemmed from an early realisation of the limited capabilities of state gencos. The need of the hour was to find a stakeholder with astute expertise in coal mining and supply chain management.

In 2007, therefore, the Central Government allotted Parsa East and Kanta Basan (PEKB) coal blocks to RRVUNL to meet its captive coal requirements.

A transparent and competitive bidding process followed and eventually the Adani Group was selected for the task.

Despite the usual time lag in ambitious infrastructure projects, the integrated conglomerate developed the block within record time and commenced operation from February 2013.

RRVUNL has been getting assured supply and consistent quality of coal from the facilities ever since. This has resulted in unprecedented benefits for the state utility.

It has benefitted immensely from the savings made by in terms of the seamless procurement from its own coal blocks as against depending on Coal India for its supplies.

In 2017-18 alone, RRVUNL is estimated to have saved Rs 182 crore in coal cost, which will go up by Rs 300 crore in the current fiscal.

According to government estimates, the utility is projected to save a staggering Rs. 9000 crores during the life time of the coal mine, which reflects immeasurable benefits for the people of Rajasthan.

Further consistent and superior quality coal supplied by the Adani Group has helped in cutting down coal consumption at RRVUNL power plants. RRVUNL has been able to save 15 paisa per unit of power generation in the previous fiscal.

Meanwhile, the Chhattisgarh government is projected to earn over Rs.13,000 crores from Parsa East and Kanta Basan coal block in terms of royalties and tax during the mining lease period of 30 years. This includes Rs. 10000 crore to be paid by RRVUNL in royalties and the rest will be in the form of taxes.

The completion of the railway siding connectivity up to the mine site presents added benefits to the power utility, the RRVUNL has confirmed.

The MDO model is yet another success story of Public-Private Partnership, a widely established concept globally.

India has made a small start in this direction with this pragmatic decision taken by the Rajasthan government.