The Prime Minister's Office has
directed Coal India Ltd to sign
firm fuel supply agreements
with power producers, instead of
signing mere letters of assurances.
The directive will be applicable to
power projects that are scheduled to
commission before March 31, 2015,
and for which power purchase
agreements have already been
entered into with distribution
utilities. The PMO order stipulates
that CIL would enter into firm
agreements for at least 80 per cent of
the full quantity of coal mentioned,
for a period of 20 years. In the event
of a shortfall, CIL would have to
arrange for alternative sources,
including imports, or face penalties.
So far, as reliable reports suggest,
CIL has signed fuel supply agreements
for a period of five years at most, and
the last FSA signed was in April 2009.
In a media interaction in mid-January
2012, Sushilkumar Shinde, Union
power ministry, had hinted at this
move explaining that mere letters of
assurances would do little good to
upcoming coal-fired power plants.
The new directive is expected to
benefit power plants with an estimated
capacity of 50,000 mw. Going by the
norm that 5 million tonnes of coal are
needed for 1,000 mw of power capacity
per year, CIL will have to ensure 200
million tonnes of coal to power plants
annually. (The directive stipulates CIL
to meet at least 80 per cent of the total
requirement.)
CIL has not been faring too well on
the production front. Besides, logistical
challenges have resulted in delayed
delivery of coal to operational power
plants forcing them to run at lower
PLFs. For FY12, CIL has downwardly
revised its production target to 440
million tonnes. In the first three
quarters, it could clock a production of
291 million tonnes. For it to achieve the
annual target, production in the
January-March 2012 quarter would
need to be 149 million tonnes or nearly
13 per cent higher than in the same
quarter of 2011. The target achievement
appears unlikely.
Coal India accounts for around 80 per
cent of India's coal production. Further,
the power sector (including both utility
and captive plants) has a share of around
80 per cent in the total coal dispatches
by Coal India Ltd. Of India's total
installed power capacity of 1,81,558
mw (including renewables), coal-fired
plants accounted for 99,503 mw,
representing a share of 55 per cent.