At first, power companies were scrambling for supply of domestic coal. With supply scenario apparently improving, both in India as well as in the global market, the focus of electricity producers appears to have shifted to quality and price.
In a shift from its December 10 statement that fuel supply agreement (FSA) may be signed “probably within a month”, the country’s largest power producer NTPC recently came up with fresh demands on quality of coal as a precondition to sign the supply pact.
According to sources, in a communication earlier this week, NTPC wanted supplies above a particular calorific value representing the erstwhile ‘F’ grade. While, efforts to contact NTPC Chairman remained unsuccessful, sources said the communication has left CIL in a tizzy.
“It is confusing, to say the least. All issues appeared to have been buried following a chairman level meeting on December 10, wherein both the companies expressed confidence to enter the supply pact sooner than later. But, the reality proves to be different,” a CIL source told
“Given the status of our coal reserves, we produce coal right from 2200 kcal per kg (to 6000 kcal and above) gross calorific value. We were mandated to urgently enhance supplies to meet the supply shortage. So far in 2012-13, we lived up to our promises,” the source said indicating that throwing up fresh challenges may be counter productive.
Quality vis-à-vis price
NTPC is not alone. State-owned Damodar Valley Corporation (DVC), arguably the single largest power producer in the Eastern region, demanded CIL to stop supplies of high calorific value coal (exceeding 5600 kcal) – slated to be sold at import parity price – as consumers were averse to paying higher price for electricity.
Jharkhand, a co-owner of the statutory organisation, recently surrendered its allocation of 250 MW from the 2X 500 MW Durgapur Steel thermal power plant, owing to high cost of fuel leading to higher tariff.
“We want supplies of C, D and E grade coals (3300-5600 kcal) as was benchmarked in the linkages,” DVC Chairman R.N. Sen told Business Line .
The corporation previously agreed to take some supplies of higher quality B grade coal (5600-6200Kcal) for Durgapur unit.
But, according to Sen, problem cropped up on two fronts. First CIL despatched more quantities of such high value coal than agreed. Secondly, CIL did not revise price of such coal downwards, keeping in tune with the steady softening of prices in the global market, during the last one year.
Delaying tactics
This is not all. Some private players, who had once criticised CIL for not entering into fuel supply pacts, are now delaying delivery of coal as per FSA, citing logistics issues.
According to sources, most of these companies have entered into highly unfavourable power purchase agreements (PPA) wherein higher generation would only lead to higher losses. All these companies are now eagerly awaiting a lifeline from the Union Cabinet, weighing proposals for tariff revision.