Industry Demands “Attractive” Block Auction Norms

These are quiet times in the Indian coal sector.

- Sumit Maitra

The country’s thermal power plants, at least the majority of them, are no more running short of coal as the state-run coal mining companies are fighting all odds to raise productions and employ some deft supply management to ensure that coal is made available round the clock to the power units.

The happy situation, however, appears deceptive as coal imports continue to surge being done even by power plants which are away from the coasts thus having little logistical incentive to bring the consignment up to their gates at competitive prices.

“Out of 235 million tons (mt) that was imported last year, about 50 percent has to be compulsorily imported in the form of coal for power plants located at coasts and coking coal used by steel plants. But the rest 50 percent is thermal coal for non-shore based plants which can be clearly substituted. Unfortunately, this component was close to zero in 2007,” Partha S Bhattacharyya, former chairman of Coal India Ltd said.

According to Bhattacharyya, government’s effort at that time to raise production was restricted only to asking Coal India to raise production without encouraging entry of multiple players in the coal mining space.

“This has led to a clear gap of 125 mt that needs to be met. The gap would expand once the stranded power capacity of 40,000 MW comes into operations leading to demand for 200 mt of coal,” he said.

Additional demand would come once the Plant Load Factors of power plants, now at a historical low of 60 percent due to inability of distribution companies to buy power, said Bhattacharyya.

If this gap, set to grow wider, has to be closed, Bhattacharyya estimates that about 20 billion tons reserves of coal needed to be given out, either allocated or auctioned through a transparent process to bring down imports.