State-owned NLC seeks global, private firms to develop two coal mines

By Sudarshan Varadhan

NEW DELHI (Reuters) - Lignite miner and power producer NLC India Ltd has invited domestic and foreign companies to develop its coal blocks in the eastern state of Odisha in a bid to secure cheaper fuel for its power plant, the firm's chairman said on Tuesday.

Thermal power plants in India, home to the fourth biggest reserves of coal in the world, are grappling with fuel shortages following a sudden rise in demand triggered by a decline in hydro and nuclear electricity generation.

The company, owned by the southern Indian state of Tamil Nadu, has invited bids for mining two blocks to produce 20 million tonnes a year for the life of the mine, which has reserves estimated at more than 550 million tonnes.

Near the mines, NLC is building a 4,000-megawatt thermal power plant in two phases, and aims to cut fuel costs to make "power affordable to people", chairman Sarat Kumar Acharya said.

"It will be much more economical to produce coal through this contract, as our administrative cost will be significantly reduced," he told Reuters.

"The contractor will be responsible for everything from the exploration to excavation of coal."

NLC will float a similar tender by the end of this month to mine coal from its block at Ghatampur in the eastern state of Jharkhand to power a 1,600-MW power plant, Acharya added.

Both plants are expected to operate at full capacity in about 5 years.

Most Indian industries and power producers prefer captive mines as the South Asian nation lacks sufficient railway trains and domestic coal prices are much higher than mining costs.

Foreign companies willing to participate in NLC's tender may have to join hands with domestic firms, Acharya said, adding that the company expected to start production from the mines within two years.

Instead of a fixed rate of return, payments to Odisha coal mine developers will be linked to output. The two mines, Talabira II and III, will supply about 5 million tonnes of coal each year to a power plant at Tuticorin in Tamil Nadu.

(Writing by Nidhi Verma; Editing by Clarence Fernandez)