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JUN 08 2012

Govt draws plan to avoid costly coal imports

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 08th JUN 2012

The government might have asked Coal India Ltd (CIL) to resort to imports to smoothen coal availability for fuel-starved power plants, but the state-owned miner has chalked out a detailed plan to avoid costly shipment of the commodity or to at least keep these to a minimum. Its latest strategy, formulated with coal ministry’s brass, is to meet the mammoth supply obligation by ramping up domestic production.

The multi-pronged strategy includes quickly ramping up production to 615 million tonnes annually by 2017. The target is to increase production up to 40 per cent in the next five years, to keep the shortfall to a minimum. This will be achieved by strict mine-level monitoring of performance and pushing for quicker ecological clearances and land acquisition, by seeking intervention of higher authorities, including the Planning Commission and the Prime Minister’s Office. “Imports would not be needed to meet new coal supply obligations in the 12th Plan. We have drawn an elaborate plan with Coal India,” a senior coal ministry official, who did not wish to be named, told Business Standard.

Confirming formulation of the plan, Coal India Chairman and Managing Director S Narsing Rao told Business Standard, as a part of this strategy, the company would gradually bring down e-auction volumes. “It would be brought down from around 10 per cent of production at present to less than seven per cent by 2015. This would not impact our profitability. In case earnings are hit, we could look at increasing the floor price,” he added.

The company also plans to supply 80 per cent of the coal required by companies to run power plants at a 85 per cent Plant Load Factor (PLF). “While most companies are running their plants at over 90 per cent PLF, Coal India would stick to the commitment for keeping the plants running at 85 per cent load according to Letters of Assurance (LoAs). This would further help us in meeting obligations,” Rao said. Power companies would have to bridge the resultant gap through importing coal on their own.

CIL has signed fuel supply agreements (FSAs) with 14 power units commissioned after March 2009. “The company would now have to sign pacts with an additional 81 units of 41,000 Mw capacity, including those commissioned between January 2012 and March 2015. The 81 units would take the entire requirement to around 170 Mt, another top company executive said. Around 60,000 Mw of fresh power capacity is likely to come on stream by 2016 requiring 252 Mt coal. This, added to the existing linkages of 305 Mt, takes CIL’s supply obligation to 557 Mt.

CIL also plans to gradually increase the power sector’s share in the company’s overall production.

While the company plans to raise output to 615 MT by then, production would at least reach 585 MT in a worst case scenario, leaving a gap of 89 Mt. “A major part of this gap, around 70 Mt, would be met through captive production by power companies,” Rao said. The rest of the gap would be met as CIL will supply coal under new Fuel Supply Agreements at 80 per cent of the Annual Contracted Quantity, lower than the commitment of 90 per cent.

As part of the strategy, from the current 70 per cent to over 80 per cent by 2016, leaving no room for any need to resort to imports. The production itself would be increased by over 35 Mt annually for the next five years to an overall incremental production of 175 Mt in 12th Plan, Rao said.

Tags

Coal Coal India Limited Import 12th Plan Prospecting Licence Fuel Supply Agreement CIL Planning Commission Power

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