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
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