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Power producers hurl coal quality, pricing charges at CIL again

CIL says inspection procedure under progress, billing according to agreement

Shreya Jai  |  New Delhi 

A year-long tiff and a series of resolutions later, complaints regarding the quality of coal sold by Coal India (CIL) continue to haunt the state-owned company. Coal-based power producers have approached the government alleging delays in implementation of third-party inspection of coal sold by CIL.

Following a meeting by Piyush Goyal, minister of state for coal, power and renewable energy, with CIL, NTPC, private power producers and other agencies of the government in June 2014, CIL had notified a list of 26 agencies for NTPC and other state- and privately-run power generation utilities.

Private independent power producers, represented by Association of Power Producers (APP), had written to the government in December 2014 that there were deviations in the reports filed by the agencies suggested by CIL and the third-party sampling was yet to be fully implemented.

  • Third-party coal inspection in limbo
  • Power producers allege deviations in the report by agencies suggested by CIL
  • CIL maintains full freedom to utilities to choose any agency
  • Mismatch in billing and grade of coal
  • CIL executives say power companies charged according to agency report and fuel supply agreement

In its reply to APP, CIL said it had communicated to coal companies and power utilities for engagement of third-party sampling agency for the assessment of the quality of coal. The utilities are free to select any agency and appoint it at the loading end of subsidiary coal companies. The choice of laboratory for analysis was also open for power producers.

“The billing of the coal supply will be as per fuel supply agreement provision based on the analysis result by the third party of the power utilities,” said the CIL’s reply.

Senior CIL officials said the company was in talks with both the coal and the power ministries to develop a roadmap to follow the instructions given by the government on third-party inspection and have a transparent procedure to deal with the same.

NTPC, which has appointed different agencies at its various power plants, is expecting reports by mid-February. However, according to sources, wherever the report has come, CIL has refused to accept the results.

“Meanwhile, CIL is charging rates for higher grade of coal, but it is supplying lower-grade coal. Due to this mismatch, the firm is making a whooping Rs 15,000 crore annually,” said a senior APP executive. Most private producers have either not engaged any agency or have changed theirs in the past months.

Market experts say the quality of coal supplied to power plants has a cascading effect on the whole sector. Also, the policy is biased with imported coal being mandated for quality check and not domestic coal.

“The receipt of inferior quality of coal increases the coal consumption where 20-25 per cent excess coal is used. Normally, 600 grams of coal is required to generate one unit of electricity but due to the receipt of inferior quality of coal, the consumption increases to 750-800 grams. The generation companies transfer this burden on consumers and distribution companies collect this amount through FPPPA (fuel and power purchase price adjustment) charges, which are revised after every three months,” said a senior power sector expert.

In 2013, NTPC had raised the issue that due to adulterated coal with boulders and ash content as high as 30-40 per cent, it suffers a loss of Rs 11,000 crore annually. CIL then stopped supplies to NTPC citing payment issues as the power generator was billing on the quality of coal at the receiving end. The row lasted for a year with both parties agreeing to a third-party inspection agency at the loading end. The government extended the facility for private players as well.

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First Published: Thu, January 29 2015. 22:31 IST