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Coal privatisation -- a must

U. D. Ravel

TO SUSTAIN the pace of the economy's development, a reconsideration of the policy related to the coal sector's development is needed. This has to be seen against the background of the coal industry's nationalisation in 1973.

With the thrust in industrial development starting with the Five Year Plans, the demand for coal from steel and other industries has been increasing. In the recent Plans, coal-based power generation has shown a rapid increase, and, today, the power secto r (utilities) alone accounts for nearly 66 per cent of the coal demand. In addition, a number of captive power plants have been established by various industries. According to estimates, coal-based power generation may be accounting for around 70 per cen t of the total power generation (utilities plus non-utilities).

An analysis of the coal-consumption trend in various sectors indicates that the growth in coal demand is now, mostly based in thermal power-generation programmes. The critical issues are: Adequate availability of coal, in terms of quantity, the supply of coal as per boiler design, the cost of coal at power stations, and the movement of coal. Since, there is likely to be a spurt in the demand for coal -- following the completion of ongoing power projects and the requirements for large, coal-based the rmal power generation capacities in the Ninth and Tenth Plans -- a long-term policy for the development of coal resources is absolutely essential.

Further, issues such as developing new technologies to improve the quality of coal supplied, and for efficient utilisation of coal, are also becoming increasingly relevant. Optimal exploitation of opencast and underground coal resources and environmental issues are other subjects that need to be considered.

According to coal experts, given the huge investment requirements of the economy, in view of the fact that coal production needs to be almost doubled, that there is not much scope for budgetary support, there is no alternative to private participation, i n the sector. The private sector's better participation would also warrant setting up a regulatory framework that also needs to be examined.

One view has it that the projections of demand in coal made by the Union Power Ministry are somewhat exaggerated. The coal consumption norm (0.74 kg/kWh) assumed by the Power Ministry has been questioned by the Coal Ministry. Specific coal consumption fo r power generation is lower, because of the improved heat-rate, on account of the use of boilers using improved technology, or the average calorific value of domestic coal is higher than that assumed by the Power Ministry projections. In addition, if a s ubstantial part of the coal demand for the power sector is met by imports, the total quantitative requirement of coal would also come down, because of the higher calorific value of imported coal vis-a-vis domestic coal. It is clear, these issues need to be looked into, before firming up estimates of coal demand for the power sector.

As the power sector would accounts for 70 per cent of the estimated demand, any correction of an overestimation of demand for this sector, would significantly bring down the total requirement. Arrangements for supply of coal at any given demand-estimate, require corresponding infrastructure facilities, which means there could be a mismatch between the supply-Plan for coal and associated infrastructural facilities. The implication is that the demand estimates given above, should be looked into carefully, at the time of firming up the coal-production programmes.

The power sector's coal demand is expected to increase from 215 million tonnes (mt) in 1996-97 to 350 mt and 500 mt. in the terminal years of Ninth and Tenth Plans, respectively, that is, a jump of 135 mt and 150 mt, against an increase of 78 mt during t he Eighth Plan period. The total installed power-generating capacity, by the end of the Eighth Plan was expected to be 89,372 MW, of which the coal-based capacity would be 53,323 MW (60 per cent).

As per the Power Ministry's projections for the Ninth Plan, the proposed total generation capacity addition was 58,012 MW, comprising a coal-based capacity addition of 30,512 MW. Similarly, the capacity addition proposed for the tenth Plan was 63,675 mw, comprising a coal-based element of 30,000 mw. The total installed generating capacities projected for the terminal years of the Ninth and Tenth Plans were 1,44,168 MW and 2,07,842 MW, respectively, of which coal-based generating capacity was expected to be 81,788 MW (57 per cent) and 1,11,788 MW (54 per cent), respectively, against 51,276 mw at the end of the Eighth Plan.

It is evident that coal-based generation capacity has been given preference, in view of the relatively greater availability of domestic coal resources and also because the cost of power generation with domestic coal, appears to be cheaper at the present levels of relative prices, when compared with other fuels.

In addition, the lower lead time for thermal plants vis-a-vis hydel stations and the difficulties associated with the hydel development have also contributed to the relatively greater development of the coal-based thermal capacity in the country. This is evident from the exercise carried out by the Planning Commission, on the relative cost of power generation based on alternative fuels at such representative locations as Delhi, Gandhar, Vizag, Cuddalore and Ib Valley.

The result of techno-economic exercises using beneficiated coal, compared with that of domestic raw and imported coal, has indicated the cost of power generation using de-shaled coal is cheaper than using imported coal. However, it was marginally higher than unwashed domestic coal. The economic advantages of coal beneficiation at certain distances away from pitheads, has already been established.

It has been observed that the location of proposed coal-based thermal Plants were along the lines recommended by the Committee for Selection of Sites for Large Thermal Power Stations, constituted by the Power Ministry (June 1990). Major considerations fo r the Committee, while submitting its recommendations,were availability of coal and water, transportation facilities, land for ash disposal, geological soundness of the location, vulnerability to floods, environmental considerations and evacuation of pow er. Notwithstanding this, it is imperative that pithead power capacities are maximised, in view of movement-constraints and environmental considerations.

Regarding coal availability, the Committee was guided by the Coal Ministry's data. The firm projections of coal demand vis-a-vis availability in various coalfields, were based on the indications made by the Working Group on Coal and Lignite for the Eight h Plan (1990-95). Also, the Committee had gone by the tentative estimates of the various coalfields' production potential, for the terminal year of the Ninth and Tenth Plans, as indicated by the Working Group.

The Committee found there were only six potential coalfields, from where coal could be mined for power generations -- Singrauli, Korba, Ib Valley, North Karanpura, Talcher and Ranigunj. The Committee specified, it would be necessary for coal mining organisations to draw up specific timebound programmes, for investigation of the identified coal blocks and evacuation facilities (that is, construction of railway lines for making coal available for power generations). It also recommended t hat coal production should be increased in the Wardha Valley and Singrauli, to meet the power-demand of the Western and Southern regions, in order to avoid huge investments in transport-infrastructure for coal transportation from the easte rn region.

Going by the projections made by the Power Ministry, the incremental coal requirement for the power sector would be very large and the annual coal demand during the terminal years of the Ninth and Tenth Plans would be 160 mt and 310 mt respectively, for the power sector alone, above the anticipated domestic level of availability in 1996-97. These requirements, if they are to be met, could require unprecedented efforts by the nationalised coal industry, entailing radical policy changes.

(The author is a Dhanbad-based writer.)