CoalGate : Whats' the big deal!!!

yes, coal gate/ coal scam that unveiled by CAG in its report was not a big deal. why!! i remember those days when I got copies of companies requesting coal blocks to be allocated to them to the coal ministry with heavy recommendations from the state govt. Some fishy recommendations were being seconded by the power ministry too.At that time, I knew its a nexus and surprisingly coal blocks were allocated to companies which did not know even the A,B,C,D of coal blocks means no credible end use, no history of operation, no experience at all.

surprising while communicating to one of the chief of an organisation monitoring the development of coal blocks, when he quoted that " Coal blocks are not nation's property , its the property of these whom it were allocated, so sorry could not divulge any information", I sensed something fishy. Power..i mean the power of the position/chair is beyond imagination. Decisions being taken by pressure from some beneficiaries and not in the good for the nation. And like " Sone Pe Suhaga" the problem of companies not getting coal to develop power adds the required reasons for such type of scams. The power corridor always argued that their decision was right to allocate coal blocks for the greater benefit og the nation as coal may well be mined and find its way to power stations to generate the much needed power which the country anted at that very moment to fuel the engine for the growth of the nation.

So, the finding of the CAG was not at all surprising, but yes full credit goes to CAG for bringing this to the table and in front of the nation sidelining the centre's pressure.Even after all the political storm, hue and cry, nothing can really happen and to eyewash the govt will deallocate those coal blocks of those companies which do not have a big say in the Govt. But for sure, the Govt will not touch the coal blocks which are given to big conglomerates as it is nothing to do with nation's wealth but have an angle of deeper politics attached to it.

All know Indian Junta are short sighted and tend to forget the things very quickly. It will also be forgotten in times to come and the tamasha will still goes on. there are quite a number of problems in our coal sector at this point of time and solving them is a huge challenge in itself.

for the consumers, coal is the goal and they are not at all deterred by all these scams and vehemently scouting for coal from any sources, domestic as well as foreign sources. Auction or no auction, FSA or no FSA, linkage or no linkage, what does matter to them is the feedstock for their boilers to run the show, no matter in which manner it comes and from where.

So, coal gate will be opened and this will remain in the history as one of the biggest scam of the country, Apart from that i do not find any big deal on this as currently this is the norm and scams/corruptions are part and parcel of our life.

CIL entering into Power Generation : An unfortunate step..

Unreliable coal supply to the thermal plants has emerged as one of the major bottlenecks affecting the availability of power in India. For the year 2009-10, anticipated generation from coal based utility thermal power stations was estimated to be525 Billion Unit (BU). To meet this generation and build stock up to reasonable level, 404 MT of coal was required. However, against the total requirement of 404 MT, availability of coal from Coal India Limited (CIL) was 313 MT. Taking into account 30 MT from captive mines, total indigenous coal availability was 363 MT, leaving a gap of 41 MT. This brought a number of power plants in the country's power stations under critical coal stock position.  As a result of shortages of coal, thermal plants are forced to operate at a low PLF factor. The PLF for thermal plants average only around 75% in India. This adversely impacts the power supply in the country.

However, the important question that emerges here is that despite having fourth- largest coal reserves in the world, why does the country fail to meet the coal demand? If we look at the other side of the story, the fact is that CIL (India’s largest coal producer) has stockpiles of coal which it is not able to supply. Though CIL has been growing over 6% over the last 2 years, it has been stocking huge piles of coal stock. The company currently has stockpiles of roughly 53 million tons. Now, if the country has stockpiles, why the same is not supplied to power plants? CIL blames it on infrastructure constraints. The company says it has not been able to get enough rail wagon combinations or rakes to transport the mined coal. Shortage of rail wagons has also resulted in imported coal lying idle in ports. CIL also blames inadequate railway unloading infrastructure for the difficulty in meeting supply targets. The company falls short of rakes by 15-20% of its requirement.

Therefore in order to utilize the coal stockpiles, CIL has planned to foray into power generation with the help of power giant NTPC. CIL has decided to set up a 2,000mw power plant involving an investment of Rs. 2,000 crore and has already signed memorandum of understanding with NTPC, the thermal energy generating giant in this connection. CIL has been arguing that power plants were unable to lift the stocks and coals are lost due to rains and other problems. The 53million tonnes of coal stocks in different subsidiaries would lead to otherwise wastage of valuable fuel sources.

However, the entry of CIL into power generation is not a good idea because it is the custodian of the prime fuel (coal) in the country and its entry will slow the pace of coal sector reforms. Moreover, if the supplier becomes the consumer of a national resource like coal, it will only exaggerate the coal shortage to other power plants in the country. CIL has argued that the huge stocks of coal would help ease the otherwise fuel problems for CIL’s plan. But the critical situation due to coal shortage of power plants for more than 25 power stations tells a different story. Infact, this move would backfire for CIL and would add to the criticism of CIL. CIL has been falling short of its commitments in terms of FSA and LOA executed with user industries and resort to coal import to meet the shortfall. In this scenario planning for a coal based thermal power plant based on huge coal stocks reserved by CIL would lead to speculation and questions the very intention of CIL.

During the ongoing year (2010-11), the coal requirement for the indigenous coal based thermal units is expected to be 440 MT vis-a-vis coal availability from indigenous sources is estimated to be around 388 MT. As a result, shortfall of 52 MT is anticipated in the availability of indigenous coal. The coal requirement for power sector by the end of Eleventh FYP is expected to further increase to approximately 488 MT by 2011-2012. Looking at the present coal shortages, it becomes certain that India would not be able to achieve any improvement in the power availability in the near future despite ambitious capacity addition plans.

In this backdrop, the country needs to make sure that the existing thermal capacity is utilized at the optimal PLF to meet the power deficit in the country. Being the monopoly in coal sector in India, CIL enjoys an upper hand in coal production and coal distribution. Huge coal demand from different sectors would demand CIL to increase its production by improving on technology and production efficiency. The government needs to develop connectivity infrastructure in coal fields on immediate basis rather than supporting CIL in establishing its own power plants.

The Country also needs to explore as to what extent waterways and roadways could supplement the railways in transporting coal to the power stations. The rising demand for coal and supply gap also highlights the urgency of removing restrictions on domestic production of coal by private parties, and steps to facilitate imports.  India does not permit commercial extraction of coal by private companies, but gives producers the power to access “captive blocks” for their fuel requirement.

However, allowing private companies to mine coal can also be helpful in tackling coal shortages. The alternative solution is to make the stockpiles available for selling in e-auction platform so that the SME (Small and Medium Enterprises) sector gets adequate coal for their operations.CIL will also benefit in terms of revenue realization as it gets on an average 50% more price than the notified price in e-auction platform

New report from my desk on Coal washery in India

Coal washery in India: A $5 billion business oppurtunity  is the new offering from Infraline Energy and written by me and my collegue ravi kumar.

The oppurtunity is much beyond the figure quoted above.The trend for coal washing is just picking up in India after CIL inviting private palyers to set up coal washeries in its land with provision for funding and coal linkage.

Apart from that the growing pressure from environment community coupled with huge demand from power sector would see a tremandous growth in this business segment.The early entrant to this sector would reap the benefit as coal industry is slowly but steadily picking up and moving towards reforms.

The competitive bidding for coal blocks along with governmnet thinking to allow private miners to divert resources would enhance the chance of washing business in India.

Infraline in its study predicts that with in 5 years, all coal produced in India will be washed and supplied to end users of coal which would not only help the environment but also help remove the stress from railway network.Also, the operational efficiency will be increased to around 30% by using washed coal.

My expert comments on coal sector appeared in Dow Jones terminal

12 May 2010 09:29 GMT =DJ FOCUS: India's Coal Imports To Rise As Home Supply Growth Lags
By Eric Yep

Of DOW JONES NEWSWIRES
MUMBAI (Dow Jones)--India's efforts to become self-reliant in coal are failing and imports of the fuel it relies on for over 70% of its electricity will have to rise massively in the next two decades.

It has the world's third-largest coal reserves after the U.S. and China, most of it thermal coal used for power generation. And while dominant miner Coal India Ltd. has been boosting output by 5%-6% a year, this has lagged economic growth--in March, Standard & Poor's forecast India's economy would grow 8% in the current financial year.

Efforts to use more alternatives, like domestic natural gas or imported liquefied natural gas, renewables or nuclear power, and to boost coal output through regulatory reforms have been too hesitant to prevent a surge in coal imports.

Coal imports mushroomed to 81 million tons in the financial year ended March 2010, from 59 million tons a year earlier.

The International Energy Agency's world energy outlook 2007 estimated India's hard coal imports at 28% of demand by 2030. With estimates of coal demand exceeding 2 billion tons by 2030, this implies imports of at least 560 MT. Late in 2009, Coal India said it expected a tenfold jump in its imports in the next two to three years.

These import needs pit India against rivals like China, and has underpinned the ambitions of India's coal companies in snapping up stakes in foreign coal assets in Africa, Indonesia and Australia. A string of large power projects on India's west coast have been designed to run solely on imported coal.

Traditionally, India has long had seasonal and temporary supply shortages but "in the last decade coal shortages have become a round-the-year phenomena," said S.K. Chand, senior fellow at The Energy and Resources Institute.

State-run Coal India produces over 80% of India's coal and sits on over 60% of its estimated 106 billion tons of reserves. India used 612.6 million tons of coal last year.

Indian governments' failure to ensure supply keeps up with demand is rooted in an inability to resolve land ownership, community displacement, technical and environmental issues, and to deal with black market and other illegal practices.

"Coal India has improved operating efficiency and performance a great deal, but they still lag international standards in many ways. Their technology is antiquated and their workforce has thousands of redundant employees, even after cutting more than 180,000 employees in the last decade," said Jeremy Carl, research fellow at Leland Stanford Junior University.

India's richest coal reserves are concentrated in its most underdeveloped areas, like the eastern states of Jharkhand and Chattisgarh, where extremist political movements and illegal mining activities making mining difficult.

Coal India says to meet government output targets, it needs 185 goods trains a day to transport the fuel, but average availability is only 155.

"The coal is there but you can't move it efficiently and that's a big problem. The rail infrastructure has problems...and there doesn't seem to be a clear solution to that in the short term," Tom Price, commodity analyst at UBS Securities said.

The government has long recognized the limitations of having a single company to meet India's colossal coal needs.

Over the years it has allocated 210 coal blocks that couldn't immediately be developed by Coal India to companies for their captive use, but only 10% of these are being exploited so far due to administrative and political inefficiencies.

There are instances where companies with no knowledge or interest in coal wound up with valuable blocks, while others simply waited for changes in rules to allow them to sell coal in the open market.

Talking about reaching peak production for captive coal blocks is a distant dream, R.K. Tripathy at energy research firm Infraline Energy said.

These problems have been exacerbated by environmental and forestry clearance rules, which have tightened following claims coal companies have been ignoring such regulations.

The environment ministry recently decided to make nature reserves, including areas where India's dwindling tiger population lives, as "off-limits" for mining, and in so doing blocked off 35% of the country's coal reserves.

Unleash the potential of Captive Power;says InfralineEnergy in its business report

The potential of captive power in India is huge but till date it is not utilised to its optimum due to policy and state constraints.The high power deficit in States forced it to think of an alternative way to utilise the captive power.

Odisha shows the way to India by buying around 400MW captive power from the state captive units.

The average demand for power in Orissa is hovering around 2600 Mw to 2650 Mw.Hydro generation stepped up to about 800 Mw from 490 Mw and captive generation plants (CGPs)contributing about 400 Mw to the state grid.

The leading CGP contributors are ICCL (31 Mw), Nav Bharat Ventures (70 Mw), JSL (138Mw), Nilachal Ispat Nigam (9 Mw), INDAL (40 Mw), Vedanta (295), Nalco (17 Mw) and Bhushan Steel (2 Mw).

Gridco is buying this power from state captive units at an average rate of Rs3 per unit ( OERC fixed rate).

In its business report on " Captive power plants in India", InfralineEnergy says that to meet the burgeoning demand of power sector and to scale down the deficit, India should explore innovative way to harness the CPP potential in the country ( estimated to be around 40,000MW).

Foe more information, visit store.infraline.com