No special treatment for power sector in third round of coal mine auctions

The Coal Ministry and power developers seem to be on different tracks as far as their perception of fuel requirements is concerned.

The Coal Ministry is of the view that there is no need to reserve any coal mines for the power sector in the next round of auctions, to be held in August, as the sector’s requirement has been sufficiently met in the first two rounds.

But the developers disagree and are questioning the government’s rationale for rationing fuel supplies.

The third round of auctions, to be held between August 11 and 17, will see 10 blocks going under the hammer for unregulated sectors such as steel, cement and captive power plants.

In the first two rounds of auctions, nine blocks with around 800 million tonnes of extractable reserves were sold to the power sector.

“Since a substantial amount of the power sector’s requirements have been taken care of with the first two auction rounds, we are not reserving blocks for the power sector in the third tranche of bidding,” an official told BusinessLine .

‘Coal problem solved’ “A year ago, a presentation to Prime Minister Narendra Modi had six slides showing how coal was a problem for the power sector. Today, we can safely say the problem has been solved,” the official added. Last year during this period, more than half of the coal-based power plants had critical levels of coal stocks. Today, 33 plants have at least a month of coal stocks, while several others have over 20 days of stocks. “This has been possible through constant engagement with the States, which has allowed Coal India to acquire 2,000 hectares over the last year, get 41 environment clearances and open at least a mine a month to achieve growth in production of 12.3 per cent this year,” the official said. “The question that needs to be asked now is why these power plants aren’t producing enough despite ample coal supply,” the official added.

Despite coal availability, coal-based power plants were operating at a plant load factor (PLF) of 59 per cent in June, against a target of 70.80 per cent. In the same month last year, the PLF was 65.99 per cent. The coal-based power plants say transmission constraints and lack of purchases from State electricity boards are the causes for lower power generation. They say the availability of fuel is no longer a cause of concern.

However, power developers have a different take. Most of the developers say “if there is adequate availability of coal, then the government should do away with the existing mechanism of rationing fuel supply.”

In July 2013, the then government had approved a revised supply arrangement for identified thermal power stations of 78,000 MW capacity commissioned or likely to be commissioned between April 1, 2009 and March 31, 2015.

It was decided at the time that fuel supply agreements would be signed for domestic coal, of 65 per cent, 65 per cent, 67 per cent and 75 per cent of the annual contract quantity for 2013-14, 2014-15, 2015-16 and 2016-17, respectively, for those having normal coal linkages.

“If the fuel is available, then supply should be for 100 per cent requirement. It should meet the full commitment made in the letter of assurance,” said a senior executive working for a power developer.

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