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Badal Sanyal

Kolkata , Dec. 5

THE future power generation and distribution business may witness a major change with the state-owned Coal India Ltd (CIL) actively considering entering the area of power generation. This will come as a part of the forward integration of CIL's existing mining business.

Sources indicate that CIL has already prepared the ground for its diversification plan. The justification is that CIL and its production subsidiaries will stand to gain financially if they sell power through the national grid instead of dispatching coal to the independent power generating stations owned and managed by National Thermal Power Corporation (NTPC) or State electricity boards (SEBs) or the private sector companies.

CIL's current thinking is understood to have developed after NTPC and various State Governments showed an interest in developing virgin coal blocks. In fact, NTPC has already approached the Union Coal Ministry for such blocks, to be developed by it for its captive consumption.

Sources say that this points to the fact that the NTPC does not want to depend only on CIL for its future requirement of power grade non-coking coal. Similarly, many States have approached the authorities in New Delhi for virgin coal blocks with the objective of developing them jointly with the private parties.

Other factors such as the increasing import of coking and non-coking coal and the stipulation on dispatching more than 34 per cent high ash content thermal coal to power stations beyond a distance of 1,000 km from the coal pitheads, may have influenced CIL to consider setting up power plants of its own.

It is pointed out that CIL sells coal to SEBs even at the risk of not being paid for the consignments. Its accumulated outstanding coal sale dues have crossed over Rs 5,000 crore. In view of this, according to sources, CIL feels that remaining confined to the coal mining business may not be commercially wise, particularly when existing power generating companies are planning to take up coal mining activities.

Meanwhile, all new coal projects identified to be developed by CIL during the Tenth Plan, are yet to get requisite clearances from various official agencies. Among other things, problems relating to acquisition of land have remained unresolved. This means that CIL is unlikely to achieve the targeted create additional about 70 million tonnes (mt) of production capacity by the terminal year of the current five-year plan (2006-07).

In order to expedite the process of clearing new projects, CIL board has urged the Centre to enhance the board's decision-making power to sanction projects costing up to Rs 1,000 crore from the existing limit of Rs 100 crore. Similarly, a suggestion has been made to raise the project investment limit for subsidiaries to Rs 500 crore from Rs 50 crore.

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