The financial costs associated with coal-fired electricity generation are set to rise given the need to increase coal import, according to a study report of Equatorials.
The study on coal fuel supply agreements by Coal India Ltd and recent developments commissioned by Greenpeace bring to the fore how the costs of power generation from coal plants will go up due to imports.
According to its findings, the fuel supply agreements require CIL to honour 80 per cent annual contracted supply for the power plant requirement. If there is a shortfall, CIL is expected to export and bridge the gap through imports and ensure supply.
The analysis assumes importance in the backdrop of recent findings of the Comptroller and Auditor General (CAG) on windfall profits handed out to private parties by the Government in the allocation of coal blocks.
Shortfall likely
While assuming a five per cent increase in coal production, yet there is likelihood of a shortfall of about 82 million tonnes over 2012-2017.
This is based on the assured supply of 80 per cent for existing plants. Even if this were lowered to 65 per cent of plant capacity, the shortfall is likely to be about 44 mt.
Coal import bill
The coal import bill is likely to be about Rs 25,000 crore annually during 2013-2017 assuming that the output goes up by 5 per cent and the need to supply 80 per cent of the requirement.
Given this backdrop, the price pooling mechanism of imported and domestic coal will be crucial.
The end result would be the cost of power generation using coal is poised for upside. Ultimately, the consumer will have to share the burden of higher cost of power generation, the Greenpeace study finds.