Adani Group does not foresee problems in sourcing coal from its Australian asset for Indian power plants, including ultra mega power plants, due to recent quality restrictions imposed by the Centre.
The company is developing a 60-million-tonne mine at Queensland at an estimated cost of $ 10 billion.
The Ministry of Environment and Forests recently issued a guideline to restrict import of coal below 5,000 gross calorific value for UMPPs. The ash content and sulphur content are capped at 12 per cent and 0.8 per cent, respectively.
Recent drilling reports from the Australian asset indicate the ash content of raw coal may cross the stipulated levels. But, according to Adani, the actual ash content varies within a mine. Moreover, imported coal is sold only after due washing – thereby, reducing impurities and increasing the heat value - to fetch higher market prices.
“The project is capable of producing coal as per UMPP requirements. That is no problem at all. The ash will vary according to degree of washing and the mine plan (that is, seams being selected for mining). It (ash) can go lower than nine per cent also,” Harsh V. Mishra, Chief Executive Officer – Australia, Adani Group, told Business Line in an e-mailed response.
Green restriction
India has so far awarded four UMPPs of 4,000 MW each. Two coastal UMPPs - Tata Power (Mundra) and Reliance Power (Krishnapatnam) – are designed to use imported coal. The remaining are located in the hinterland and may use imported coal only for blending purposes.
According to Ashok Khurana, Director-General of Association of Power Producers, the green restrictions should not be applicable on existing or awarded projects.
Power cost impact
Indian power sector now survives on high ash Indonesian coal of 3800-4200 GCV (gross calorific value), priced around $50-55 at Indian ports.
A back of the envelope calculation suggests that the green restrictions, if implemented, will force UMPPs to more than double the price for imported coal.
Considering the low demand for power priced over Rs 3 a unit, on the Northern grid, the higher cost of generation may impact future viability of such projects.