Coal India proposals: Are they realistic and practical?

With the continuing and worsening situation in the power supplies, it has become important that coal imports are arranged now, so that the situation could improve over next few months  

 
The last few days have witnessed a flurry of activity from Coal India (CIL) that shows the seriousness of the coal supply situation and how the company proposes to tackle it.
 
As a start, the penalty clause in the FSAs (Fuel Supply Agreements) will now cover a range of penalties from 1.5% to 40% if CIL fails to supply coal up to the 80% trigger level, while the supply however would be an imported and indigenous mix of coal.  It is unclear at this stage as to what will be the product mix be (indigenous and imported and their ratios), considering the imported coal has, an average, 6300 kcal (kilo calorie) or gross calorific value as against lower and possibly varying calorific value from indigenous mines. Only after some supplies have been effected would the power generator be able to comment on the mix.
 
In order to come to a price pooling arrangement, the Central Electricity Authority (CEA) has proposed that up to 20% of the imported coal be made available.
 
The projected coal demand for the power industry for the current year (2012-13) is estimated at 393 million tonnes (MT), and the Planning Commission has suggested that CIL import 45 MT of thermal coal, although Narasing Rao, chairman, CIL, has indicated recently that they may actually import 18 MT to 20 MT of thermal coal over and above the estimated 347 MT that would become available from indigenous sources. 
 
In a recent report published in the Mint, Chirag Shah, research director at Barclays had mentioned that as against the 88 MT of thermal coal imported in 2011-12, due to the poor monsoon, it may become necessary to import as much as 120 MT of this coal during the current season.
 
In this estimate of 347 MT, we are assuming availability of rakes, no loading difficulties at the pitheads and no transportation bottlenecks, not to speak of politically motivated labour problems!
 
The question of price pooling has already received flak and stiff opposition from coal bearing states such as West Bengal, Jharkhand, and Odisha, though, in the end, this may be overcome by political manoeuvring.  But the fact remains, power generators have little or no choice in the price they have to pay for coal!
 
In order therefore not to solely depend upon one source of supply of coal from Coal India, or from their own captive mines, if any, it would be prudent for the power generators to devise ways and means to source and carry out stand-by imports directly for any contingency.
 
The Indian Railways, on the other hand, are themselves the single largest consumers of electricity, estimated at 15 billion units, but so far they have not brought out any proposals to set up dedicated corridors from pitheads to power generating points, though, a couple of projects, such as the Eastern Corridor (85km) from Bhupdeopur to Khargoda and the East West Corridor between Khorba and Pendra Road are receiving top priority.  It is possible that they are closely watching the progress that is being made before embarking on others.
 
Land acquisition for such projects is still a major obstacle.  Besides, it has been reported that it is not easy to lay additional lines along with the existing tracks due to constant movement of traffic which has been increasing lately. Rescheduling of train timings and greater use of night operations, with additional or temporary stops, to permit scheduled trains to pass, will still help in the movement of coal supplies.
 
Also, the claim made earlier by CIL that it can offer 70 MT of coal at pitheads if power generators can shift them, has apparently not made much headway, though three of them had responded positively.
 
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)
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