Coal shortage to persist, firms bracing for imports - Quoted in the Financial Chronicle
There’s more to supply-demand mismatch than rains and prolonged labour strikes
India is third largest hard coal producer after China and the US and is fourth in the pecking order of top 10 coal importers after Japan, China and South Korea. But such rankings do not give the government any leeway in tackling coal shortage in the country.
Recently, the power industry faced a massive coal shortage leading to shutdown of thermal plants and long hours of power cuts. Many power stations were left with stock for just four to five days, ringing the alarm bells in the corridors of power.
Steel and cement companies are forced to import expensive coal. Monsoon rains and labour strikes have only accentuated the supply-demand mismatch.
“The scenario will change in the next few years,” said Union coal minister Sriprakash Jaiswal. “The government had taken steps to speed up mining and there was no coal shortage in any power plant over the past 15 days,” he told Financial Chronicle on Friday.
At present, coal production in India is virtually stagnant and at times there has been decline in output. But industries that use coal as fuel have been growing at six to nine per cent. For instance, the power sector has been growing at seven per cent, while the steel industry showed a growth of around nine per cent in 2010-11.
Coal production dropped 17.8 per cent in September compared with 1.8 per cent fall in the same month last year. On the contrary, steel production grew 6.6 per cent in September.
Industry is not optimistic about meeting coal shortage in the near future. Coal shortage will continue for another five to six years, said L Madhusudan Rao, chairman of Lanco Infratech.
“The government has taken steps and whatever action it takes over the next 12 months, the results will show over the next five years,” he said.
The Lanco group runs three power plants on coal — two units of 600mw each at Udupi, two units of 300mw each at Amarkantak and two units of 600mw each at Anpara in Uttar Pradesh.
The Udupi power station is based on imported coal and any increase in input cost is passed on to the consumer.
The Anpara station requires five million tonnes of coal every year and as per PPA, any increase in coal price is passed on to customers. But the rising cost cannot be passed on to customers in case of the Amarkantak plant, which requires three million tonnes of coal every year.
India’s largest thermal power producer National Thermal Power Corporation (NTPC) used 126.64 million tonnes of domestic coal and 10.56 million tonnes imported coal in the last financial year.
“National Thermal Power Corporation has been blending 10-15 per cent of imported coal at most of its stations and the availability of imported coal has never been a constraint at any of the stations. For technical and commercial reasons, National Thermal Power Corporation is only able to blend this much quantity of coal as any further increase can lead to breakdown of machines and hike power tariff for consumers,” said a senior NTPC official, who did not wish to be named.
Prices of coking coal have increased as much as 40 per cent globally over past few months. “A sharp increase in input cost (coking coal prices) is one of the main reasons for less profit in the second quarter,” SAIL chairman CS Verma said.
SAIL imports nearly 75 per cent of coking coal required for its plants. The remaining domestic coal also become expensive because of trade parity price, Verma explained.
“One of the key reasons for the coal shortage is because of the way resource allocation has been done in the country,” said Dipesh Dipu, director of energy and resources at Deloitte Touche Tohmatsu.
In the past decade, nearly 208 captive mines were allocated to companies in several sectors. But, only 14 to 15 of these mines are operating, Dipu pointed out.
Kameswara Rao, executive director and leader energy utilities and mining, PwC India, said, “The policy for coal allocation is unclear.”
“No coal block has been issued in last two years to private sector, and modalities for competitive bidding are yet to be finalised,” said Rao.
“Moreover, the primary producers such as Coal India and SCCL need to enhance exploration and capital investment in new mines. Also, the local development issues that have been holding up land acquisition need to be positively dealt with by coal companies and local governments making investments to improve communities and develop connecting infrastructure,” Rao added.
India’s total coal resources are estimated to be nearly 286 billion tonnes, but the proved resources are close to 114 billion tonnes. Of this proved resources, 70-80 per cent can be mined, according to global consultant PwC.
In 2010-11, India produced 532 million tonnes of coal, out of which Coal India mined 430 million tonnes.
For 2011-12, India is targeting a coal production of 554 million tonnes. Out of this, Coal India targets to source 452 million tonnes. Coal India chairman NC Jha was not reachable for comments.
India is third largest hard coal producer after China and the US and is fourth in the pecking order of top 10 coal importers after Japan, China and South Korea. But such rankings do not give the government any leeway in tackling coal shortage in the country.
Recently, the power industry faced a massive coal shortage leading to shutdown of thermal plants and long hours of power cuts. Many power stations were left with stock for just four to five days, ringing the alarm bells in the corridors of power.
Steel and cement companies are forced to import expensive coal. Monsoon rains and labour strikes have only accentuated the supply-demand mismatch.
“The scenario will change in the next few years,” said Union coal minister Sriprakash Jaiswal. “The government had taken steps to speed up mining and there was no coal shortage in any power plant over the past 15 days,” he told Financial Chronicle on Friday.
At present, coal production in India is virtually stagnant and at times there has been decline in output. But industries that use coal as fuel have been growing at six to nine per cent. For instance, the power sector has been growing at seven per cent, while the steel industry showed a growth of around nine per cent in 2010-11.
Coal production dropped 17.8 per cent in September compared with 1.8 per cent fall in the same month last year. On the contrary, steel production grew 6.6 per cent in September.
Industry is not optimistic about meeting coal shortage in the near future. Coal shortage will continue for another five to six years, said L Madhusudan Rao, chairman of Lanco Infratech.
“The government has taken steps and whatever action it takes over the next 12 months, the results will show over the next five years,” he said.
The Lanco group runs three power plants on coal — two units of 600mw each at Udupi, two units of 300mw each at Amarkantak and two units of 600mw each at Anpara in Uttar Pradesh.
The Udupi power station is based on imported coal and any increase in input cost is passed on to the consumer.
The Anpara station requires five million tonnes of coal every year and as per PPA, any increase in coal price is passed on to customers. But the rising cost cannot be passed on to customers in case of the Amarkantak plant, which requires three million tonnes of coal every year.
India’s largest thermal power producer National Thermal Power Corporation (NTPC) used 126.64 million tonnes of domestic coal and 10.56 million tonnes imported coal in the last financial year.
“National Thermal Power Corporation has been blending 10-15 per cent of imported coal at most of its stations and the availability of imported coal has never been a constraint at any of the stations. For technical and commercial reasons, National Thermal Power Corporation is only able to blend this much quantity of coal as any further increase can lead to breakdown of machines and hike power tariff for consumers,” said a senior NTPC official, who did not wish to be named.
Prices of coking coal have increased as much as 40 per cent globally over past few months. “A sharp increase in input cost (coking coal prices) is one of the main reasons for less profit in the second quarter,” SAIL chairman CS Verma said.
SAIL imports nearly 75 per cent of coking coal required for its plants. The remaining domestic coal also become expensive because of trade parity price, Verma explained.
“One of the key reasons for the coal shortage is because of the way resource allocation has been done in the country,” said Dipesh Dipu, director of energy and resources at Deloitte Touche Tohmatsu.
In the past decade, nearly 208 captive mines were allocated to companies in several sectors. But, only 14 to 15 of these mines are operating, Dipu pointed out.
Kameswara Rao, executive director and leader energy utilities and mining, PwC India, said, “The policy for coal allocation is unclear.”
“No coal block has been issued in last two years to private sector, and modalities for competitive bidding are yet to be finalised,” said Rao.
“Moreover, the primary producers such as Coal India and SCCL need to enhance exploration and capital investment in new mines. Also, the local development issues that have been holding up land acquisition need to be positively dealt with by coal companies and local governments making investments to improve communities and develop connecting infrastructure,” Rao added.
India’s total coal resources are estimated to be nearly 286 billion tonnes, but the proved resources are close to 114 billion tonnes. Of this proved resources, 70-80 per cent can be mined, according to global consultant PwC.
In 2010-11, India produced 532 million tonnes of coal, out of which Coal India mined 430 million tonnes.
For 2011-12, India is targeting a coal production of 554 million tonnes. Out of this, Coal India targets to source 452 million tonnes. Coal India chairman NC Jha was not reachable for comments.
posted by Dipesh Dipu @ 3:12 AM
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