The Hindu Business Line : NTPC gets coal block for captive consumption

AFTER two years of negotiations, the National Thermal Power Corporation (NTPC) has finally been awarded a coal-mining block for captive consumption by the Union Coal Ministry. With NTPC's aggressive capacity expansion programme based on new coal-fired stations, this comes as a shot in the arm.

NTPC can now control the fuel cost for a new power plant, which constitutes around 50 per cent of the tariff. This assumes further significance, in the wake of the recent hardening of coal prices. Over the last year, coal prices have risen sharply resulting in the generation tariff rising by around 15 paise per unit or 10 per cent of NTPC's average generation tariff.

Another dimension to this issue is that NTPC feels that it can sharply reduce the cost of extraction of coal by using global practices.

"We are confident that the coal extraction will be significantly less than that of Coal India Ltd, which is a near-monopoly supplier of coal in the country," a senior NTPC official said. NTPC has been awarded `in-principle' the Pakri Barwadih coal block in the North Karanpura coalfields in Bihar.

Currently, around 82 per cent of NTPC's stations are coal-fired with the remaining 18 per cent operating on natural gas.

Nine of NTPC's 13 coal-fired stations are located at the `pit head.' Of this, seven are located within 25 kilometres of the coal mine and these stations are serviced by dedicated railways, which are owned and operated by NTPC, thus ensuring greater security of fuel supply.

NTPC is attempting the backward linkage into the fuel supply chain not only in the coal sector but also in the gas business.

It has formed an internal committee to study the possibility of foraying into the liquefied natural gas (LNG) supply chain, especially the possibility of taking a stake in the liquefaction business.

In the absence of adequate domestic supply of natural gas, NTPC is looking at LNG as a fuel option.

However, the costs are prohibitive in the current market conditions. While Petronet sells LNG to consumers at around $4.5 (around Rs 202) per million British thermal units (mmbtu), the cheapest LNG bid that NTPC received (a few months ago) was from Yemen LNG, which had quoted in the same region.

The problem is that unless gas is priced at around $3 (Rs 135) per mmbtu, the cost of power will soar, making it unviable for state electricity boards to purchase the power. NTPC feels that a foray into the LNG supply chain, which includes, gas production, liquefaction of this gas abroad and its re-gasification in India, can significantly bring down the costs.