KOLKATA: State-run NTPC, the country’s biggest power generator and thermal coal consumer, plans to acquire at least 26 per cent stake in coal mines abroad to secure longterm fuel supplies for all its power plants, a senior executive said.
This is a shift from the company’s earlier stance of seeking only minority stakes in such mines to ensure fuel for plants that operate only on imported coal.
“As the requirement of imported coal for sustaining generation at various power stations of NTPC is likely to rise, it is felt that long-term tie-ups for imported thermal coal may be explored with interested companies across the globe,” the executive said requesting anonymity. “NTPC is looking at longterm tie-ups of imported coal for at least five years for coal with energy content between 4,200 and 6,000 gross calorific value (GCV).”
In the current fiscal, NTPC is targeting tie-ups for 17 mt of imported coal. “As imported coal is used for blending with Indian coal for power generation in NTPC’s operating power plants, the total supplies will be distributed month-wise and plant-wise as per the requirement of power plants,” the executive said. “It will be informed three months in advance.
During the operation period, if supplies are satisfactory to NTPC, in terms of quality and quantity and timelines of supply schedule, NTPC reserves the right to exercise the option of acquiring 26 per cent stake in the mine after carrying out necessary due diligence.” It has already invited fresh expression of interest from companies that own mines outside India.
(Source: The Economic Times, November 19, 2014)
JSW ENERGY PUTS ON HOLD DECISION TO BUY JAYPEE’S 500-MW BINA PLANT
JSW Energy has put on hold its decision to buy a 500-MW thermal power plant in Bina, Rajasthan, from the Jaypee Group, the company told analysts on November 17.
The asset was one of the three owned by the Jaypee Group that JSW Energy had agreed to buy in September. On November 16, JSW Energy said in a statement that it was acquiring two hydroelectric power plants from the Jaypee Group for an aggregate consideration of R9,700 crore, but the Bina power plant didn’t find any mention.
JSW Energy will wait for further clarity to emerge on the coal block allocation to power plants for captive use before taking a final call on whether to acquire the Bina power plant. In September, the Supreme Court cancelled the allocation of 214 coal blocks awarded by the government to power and steel firms since 1993. In October, the government passed an ordinance to re-auction these coal blocks in a more transparent manner.
JSW Energy said on Sunday that it will acquire 100% interest in a new company to be floated — Himachal Baspa Power — and in which the two hydroelectric projects, located in Himachal Pradesh, are to be transferred.
“Management highlighted due to lack of clarity on coal mine auctions, the decision on Bina project has been deferred,” K Shankar, a power sector analyst with Edelweiss Securities, said in a report issued on Tuesday.
Analysts are divided on the benefits that will accrue to JSW Energy from the deal.
“Whilst this acquisition will address JSW Energy’s low power purchase agreement share in its portfolio, we do not expect major value accretion from these assets, given the high premium paid, regulatory uncertainties in Karcham Wangtoo’s tariffs and JSW Energy’s balance sheet deterioration,” Bhargav Buddhadev, an analyst with Ambit Capital wrote in a note.
(Source: The Financial Express, November 19, 2014)
TATA POWER RAISES RS 1,500 CRORE VIA NCDs
NEW DELHI: Tata Power on Tuesday said it has raised Rs 1,500 crore through issue of securities and the proceeds would be utilised for general corporate purposes, including towards repayment of maturing foreign currency convertible bonds.
The power producer has issued two series of Non- Convertible Debentures (NCDs) worth Rs 1,500 crore on a private placement basis.
In a statement, Tata Power said the proceeds would be used for general corporate purposes of the company, including repayment of maturing foreign currency convertible bonds, capital expenditure and working capital.
“The 9.32 per cent unsecured, non-cumulative, redeemable, listed, and rated Series 1 NCDs aggregating Rs 1,000 crore will be repaid in 2017. The 9.48 per cent unsecured, non-cumulative, redeemable, listed, and rated Series 2 NCDs aggregating Rs 500 crore will be repaid in 2019,” the statement said.
These NCDs would be listed on the wholesale debt market segment of NSE.
The joint lead arrangers of these NCDs are Standard Chartered Bank, IDFC, Yes Bank, Axis Bank and Deutsche Bank.
Tata Power, one of the largest power producers in the country, has an installed generation capacity of over 8,600 MW.
(Source: The Financial Express, November 19, 2014)
AMERICAN OFFICIALS PUT UP HURDLES, TRY TO SCUTTLE INDIA-US NUCLEAR DEAL
NEW DELHI: A newly constituted contact group on civil nuclear issues between India and the US will meet for the first time in December, almost three months after it was announced. While the focus of the talks may be on nuclear liability matters, India is facing fresh obstacles from the US nuclear establishment.
The US is now demanding fresh bilateral safeguards to complete the final negotiations on the nuclear deal. These are in the nature of non-proliferation assurances, many of which have already been provided by India.
India and the US are yet to complete the administrative arrangements that are needed to operationalize the deal. This has taken over two years to complete, and despite a seemingly positive note from the Modi-Obama summit, Indians are hard put to find “problem-solvers” within the US system. In fact, there is a distinct feeling in India that elements within the US administration really don’t want the nuclear deal to succeed. The Democrats in power now were at the vanguard of the opposition to the deal when it was being negotiated under a Republican administration.
While this may not be the approach at the very top, it’s becoming a regular feature among mid-level US officials, making progress on the deal increasingly tough. The upshot is that the delays Indians feel are being deliberately built in, will have an adverse impact on US companies — Westinghouse and GE — seeking to build nuclear reactors in India.
It’s not that the issues are not difficult to deal with. Certainly on the issue of nuclear liability, India has to do a lot of heavy lifting to make it easier for Indian and foreign companies to invest in the nuclear energy sector. Moreover, getting a low enough price for nuclear power will be a challenge when commercial deals are negotiated. But the Indian negotiators say both countries are streets away from that space yet.
Under the separation plan, India has voluntarily put barriers between its civilian and strategic programmes, with the civilian sector under full IAEA safeguards. India added on the additional protocol with the IAEA, another layer of more intrusive verification. All of these are part of the India-US nuclear deal.
However, the US is now asking for fresh bilateral verifications, particularly on tracking of nuclear fuel through the entire cycle. This has posed fresh hurdles in the nuclear deal. India is unwilling to go down this road, believing, correctly, that this would undermine an international institution like the IAEA, not to speak of opening the door to more unilateral action in the nuclear sphere by states.
The Modi-Obama summit declared that India had completed the procedures necessary for joining the global non-proliferation regime of the four groups – Australia Group, Wassenaar Arrangement, Missile Technology Control Regime (MTCR) and Nuclear Suppliers Group (NSG). India would now want this process to be completed as soon as possible.
Although this issue is not on the new bilateral Contact Group’s agenda, India is likely to highlight the US presidential commitment in the nuclear deal about facilitating its entry into these non-proliferation regimes.
When the green light flashes, India will be ready with a formal application. In the coming weeks, India is expected to push the Americans hard.
(Source: The Times of India, November 19, 2014)
INDIA PLANS SOLAR ARMY, TO TRAIN 50,000 PEOPLE
NEW DELHI: The government is planning to train around 50,000 people in areas related to solar power—a so-called solar army that would help India achieve ambitious targets in harnessing the power of the sun.
The workforce will be trained through organizations such as the industrial training institutes (ITIs) under the government’s national skill development mission. While India has a solar generation capacity of 2,900 MW, the National Democratic Alliance (NDA) government has substantially revised an earlier target of achieving 20,000 MW capacity by 2022 to 1,00,000 MW. This would require an investment of around `6.5 trillion over five years.
“For us to achieve this ambitious target, there will be a requirement of land, labour and capital. This 50,000-strong solar army will be provided three to six months training in the solar energy related areas, which will also prepare them for the job opportunities that the sector will have to offer,” a government official said, requesting anonymity. “On the other hand, they will help meet the sector’s demand for a workforce.”
Of India’s installed power generation capacity of 2,54,049.49 MW, renewable power has a share of only 12.47%, or 31,692.14 MW. India’s National Action Plan on Climate Change recommends that the country generate 10% of its power from solar, wind, hydropower and other renewable sources by 2015, and 15% by 2020.
“There is a requirement for technicians. We are trying to work out a plan under the government’s skill programme,” said a second government official who also didn’t wish to be identified.
Skill development is a focus area of the government and the Skilling India mission plans to train 500 million people by 2022 that the government believes would provide a job-ready workforce to several industries. Bharatiya Janata Party (BJP) leader Rajiv Pratap Rudy took charge of the ministry of skill development and entrepreneurship as minister of state on 11 November.
Queries emailed to a spokesperson for the ministry of new and renewable energy on 9 November remained unanswered.
India launched the Jawaharlal Nehru National Solar Mission in 2010, which earlier had plans to add 20,000MW of grid-connected solar power to the country’s energy mix by 2022 in three phases.
The BJP made energy security a part of its campaign for the general election.
To be sure, an industry executive said creating a solar army is not an immediate concern.
“From an on-ground execution point of view, we don’t see any immediate manpower concern. Here manpower requirement with respect to setting up of a solar plant, utility or rooftop is largely an amalgamation of fabrication, electrical and masonry skills. The skill upgradation needed is minimal and can be quickly achieved, mostly through on-the-job training. However, at project management level, we feel there is a growing need for qualified manpower, owing to its requirement for specialized knowledge and training,” said Ajay Goel, chief executive officer, Tata Power Solar Systems Ltd. “There is an industry need for stronger focus on identifying the talent and equipping them with project management skills and global best practices.”
This comes at a time when India’s per capita power sector consumption, about 940 kilowatt-hour (kWh), is among the lowest in the world. In comparison, China has a per capita consumption of 4,000 kWh, and developed countries average around 15,000 kWh of per capita consumption. The centre is trying to increase power generation to meet demand and boost economic growth.
“It saddens us that 67 years after independence, a quarter of our people are still deprived of as basic a need as electricity,” Piyush Goyal, minister for power, coal and new and renewable energy, said at recent India Economic Summit in New Delhi.
The government has identified deserts for exploring the possibility of setting up of solar and wind energy projects. According to a study conducted by state-owned Power Grid Corp. of India Ltd, there is a total available potential of 315.7 GW of solar and wind power in Rajasthan (Thar), Gujarat (Rann of Kutch), Himachal Pradesh (Lahaul and Spiti) and Jammu and Kashmir (Ladakh), with an investment requirement of `43.7 trillion spread over till 2050.
“All this land in the deserts, along national highways, border areas and wastelands can be used for setting up solar power projects,” said the first government official quoted above.
Mint reported on 27 August about India’s ambitious campaign to promote solar energy through the Indian Army and central public-sector units—providing them with grants on the condition that they source equipment from domestic manufacturers.
The government’s strategy to focus on renewables also stems from the fact that India has an energy import bill of around $150 billion, which is expected to reach $300 billion by 2030. India imports 80% of its crude oil and 18% of its natural gas requirements.
The government’s energy security plans include harnessing renewable sources such as solar energy, biomass and wind power, along with coal, gas, hydropower and nuclear power to bring about an energy revolution in the country.
In a separate development, an agreement was signed between Indian Renewable Energy Development Agency Ltd (IREDA) and Exim Bank of the US on Tuesday for a credit facility of $1 billion.
The centre recently raised the authorized share capital of IREDA from `1,000 crore to `6,000 crore to cater to the debt requirements of the sector.
(Source: Mint, November 19, 2014)
COAL BLOCK AUCTION – POWER, STEEL COS WITH GOOD RECORD TO GET PREFERENCE
NEW DELHI: The government will give weightage to companies with existing power, steel or cement plants and experience in developing mines while auctioning coal blocks, according to officials aware of the rules being framed for the auction.
Preference will also be given to bidders on the basis of preparedness of their end-use plants, proximity of their projects to the mine, and their financial and past development records, they said. The government is expected to shortly issue the draft rules for auction of 204 coal blocks that were cancelled by the Supreme Court in September.
The rules will specify eligibility of companies for participating in the bidding, while the methodology for auction will be placed before the Union Cabinet for approval, a senior government official said.
“Companies with operating end-use plants or those which have made over 90 per cent investment in the associated projects will get priority during auction as these 74 mines are either producing or will soon become operational,” he said. Stakeholders’ comments will be sought on the draft rules that allow companies to use coal from a block in different end-use projects belonging to the same group. The companies will have to provide details of such projects while bidding.
Companies owning 42 operational coal mines will have to pay Rs 295 per tonne additional levy for the coal mined in two parts. The levy for coal mined till September 24 has to be submitted by December 31, while the balance for coal extracted till March 31, 2015, has to be paid by June 30, 2015.
The auction of coal blocks will be conducted in two stages—technical and commercial. Companies will have to meet the technical parameters to bid for the blocks.The government is expected to issue the tender documents for auction by December 15, giving details of grade of coal, geological reserves, extractable reserves and capacity of 74 coal blocks that will be offered in the first round of auction.
However, the rules are silent on statutory clearances. The companies will have to commit milestones for development of the mines at the time of signing the allocation letters.
Allocation letters, unlike in the past, will have comprehensive details about the blocks, end-use projects and the companies.
(Source: The Economic Times, November 19, 2014)
IN PURSUIT OF COAL, INDIA DIGS ITS OWN GRAVE
DHANBAD: Decades of strip mining have left this town in the heart of India’s coal fields a fiery moonscape, with mountains of black slag, sulfurous air and sickened residents.
But rather than reclaim these hills or rethink their exploitation, the government is digging deeper in a coal rush that could push the world into irreversible climate change and make India’s cities, already among the world’s most polluted, even more unlivable, scientists say. “If India goes deeper and deeper into coal, we’re all doomed,” said Veerabhadran Ramanathan, director of the Center for Atmospheric Sciences at the Scripps Institution of Oceanography and one of the world’s top climate scientists. “And no place will suffer more than India.”
India’s coal mining plans may represent the biggest obstacle to a global climate pact to be negotiated at a conference in Paris next year. While the United States and China announced a landmark agreement that includes new targets for carbon emissions, and Europe has pledged to reduce greenhouse gas emissions by 40%, India, the world’s third-largest emitter, has shown no appetite for such a pledge. “India’s development imperatives cannot be sacrificed at the altar of potential climate changes many years in the future,” Union power minister Piyush Goyal said at a recent conference in New Delhi in response to a question. “The West will have to recognise we have the needs of the poor.”
Goyal has promised to double India’s use of domestic coal from 565 million tonnes last year to more than a billion tonnes by 2019, and he is trying to sell coal-mining licences as swiftly as possible after years of delay. The government has signalled that it may denationalise commercial coal mining to accelerate extraction.
“India is the biggest challenge in global climate negotiations, not China,” said Durwood Zaelke, president of the Institute for Governance and Sustainable Development.
Prime Minister Narendra Modi has also vowed to build a vast array of solar power stations, and projects are already springing up in the sun-scorched west.
But India’s coal rush could push the world past the brink of irreversible climate change, with India among the worst affected, scientists say.
Indian cities are already the world’s most polluted, with Delhi’s air almost three times more toxic than Beijing’s by one crucial measure. An estimated 37 million Indians could be displaced by rising seas by 2050, far more than in any other country. India’s megacities are among the world’s hottest, with temperatures in Delhi reaching 40°C. Traffic, which will only increase with new mining activity, is already the world’s most deadly. And half of Indians are farmers who rely on water from melting Himalayan glaciers and an increasingly fitful monsoons.
India’s coal is mostly of poor quality with a high ash content that makes it roughly twice as polluting as coal from the West. And while China gets 90% of its coal from underground mines, 90 percent of India’s coal is from strip mines, which are far more environmentally costly In a country three times more densely populated than China, India’s mines and power plants directly affect millions of residents. Mercury poisoning has cursed generations of villagers in places like Bagesati, in Uttar Pradesh, with contorted bodies, decaying teeth and mental disorders.
The city of Dhanbad resembles a post-apocalyptic movie set, with villages surrounded by barren slag heaps half-obscured by acrid smoke spewing from a century-old fire slowly burning through buried coal seams. Mining and fire cause subsidence that swallows homes, with inhabitants’ bodies sometimes never found.
Suffering widespread respiratory and skin disorders, residents accuse the government of allowing fires to burn and pollution to poison them as a way of pushing people off land needed for India’s coal rush.
“The government wants more coal, but they are throwing their own people away to get it,” said Ashok Agarwal of the Save Jharia Coal Field Committee, a citizens’ group.
TK Lahiry, chairman of Bharat Coking Coal (BCCL), a government-owned company that controls much of the Jharia region, denied neglecting fires and pollution, but readily agreed that tens of thousands of residents must be displaced for India to realise its coal needs. Evictions are done too slowly, he said.
With land scarce, Bharat Coking is digging deeper at mines it already controls. On a tour of one huge strip mine, officials said they had recently purchased two mammoth Russian mining shovels to more than triple annual production to 10 million tonnes. The shovels are clawing coal from a 420-foot-deep pit, with huge trucks piling slag in flat-topped mountains. The deeper the mine goes, the more polluting the coal produced.
India has the world’s fifth-largest reserves of coal but little domestic oil or natural gas production. The country went on a coal-fired power plant building spree over the last five years, increasing capacity by 73%. But coal mining grew just 6 percent, leading to expensive coal imports, idle plants and widespread blackouts. Nearly 300 million Indians do not have access to electricity, and millions more get it only sporadically.
“India is going to use coal because that’s what it has,” said Chandra Bhushan, deputy director of the Delhi-based Center for Science and Environment, a prominent environmental group. “Its strategy is ‘all of the above,’ just like in the US.”
Each Indian consumes on average 7% of the energy used by an American, and Indian officials dismiss critics from wealthy countries. “I don’t want to use the word ‘pontificate’ when talking about these people, but it would be reasonable to expect more fairness in the discussion and a recognition of India’s need to reach the development of the West,” Goyal said with a tight smile.
One reason for the widespread domestic support for India’s coal rush is the lack of awareness of just how bad the air has already become, scientists say.
Smog levels that would lead to highway shutdowns and near-panic in Beijing go largely unnoticed in Delhi. Pediatric respiratory clinics are overrun, but parents largely shrug when asked about the cause of their children’s suffering. Face masks and air purifiers, ubiquitous among China’s elite, are rare here. And there are signs Indian air is rapidly worsening. “People need to wake up to just how awful the air already is,” said Rajendra K Pachauri, chairman of the Intergovernmental Panel on Climate Change, the world’s leading inter-governmental organisation for the assessment of climate change.
India’s hope to save both itself and the world from possible environmental dystopia can be found in the scrub grass outside the village of Neemuch, in India’s western state of Madhya Pradesh. Welspun Energy has constructed what for the moment is Asia’s largest solar plant, a $148-million silent farm of photovoltaic panels on 800 acres of barren soil.
Welspun harvests some of the most focussed solar radiation in the world. Dust is so intense that workers must wash each panel every two weeks.
Under Modi, India is expected to soon underwrite a vast solar-building programme, and Welspun alone has plans to produce within two years more than 10 times the renewable energy it gets from its facility in Neemuch.
The benefits of solar and the environmental costs of coal are so profound that India has no other choice but to rely more on renewables, said Dr Pachauri. “India cannot go down China’s pathway, because the consequences for the public welfare are too horrendous,” he said.
(Source: The Financial Express, November 19, 2014)
PESB NAMES S BHATTACHARYA NEW COAL INDIA LTD CMD
NEW DELHI: The PESB has recommended the name of S Bhattacharya, a senior IAS officer, for the post of Chairman and Managing Director of CIL— the world’s largest coal miner which has been without a regular head for the last few months.
Bhattacharya, CMD of Singareni Collieries Company Ltd since May 2012, was widely viewed as a front runner for the job.
‘Search-cum-Selection committee recommended the name (of S Bhattacharya) for the post of Chairman and Managing Director (CMD), Coal India Limited (CIL),’ Public Enterprises Selection Board (PESB) said on its website.
The development comes at a time when CIL is grappling with target shortfalls, which has led to fuel shortages for thermal power plants. It missed the production target of 482 million tonnes last fiscal, with output of 462 MT.
Sutirtha Bhattacharya, 1985 batch IAS, Government of Telengana, succeeds S Narsing Rao, an IAS officer of 1986 batch from Andhra Pradesh Cadre. Rao had resigned from the coal PSU in May.
Additional Secretary (Coal) A K Dubey was given the additional charge as CMD of CIL from 26 June.
Bhattacharya has been selected from among 12 contenders who were interviewed for the key post by PESB. The candidates who were interviewed included Nagendra Kumar, Director (Technical), Coal India, Gopal Singh CMD, Central Coalfields Ltd and N K Nanda, Director (Technical) NMDC, PESB said.
The government had recently said that the production of Coal India would be increased to one billion tonnes by 2019.
(Source: Millennium Post, November 19, 2014)
CIL STEPS UP POWER PLAN
After about four years of delay, Coal India Ltd’s (CILs) first proposed pithead thermal power plant at Sundergarh district in Odisha got the board’s nod. This gave Sambalpur-based Mahanadi Coalfields Ltd (MCL) the right to diversify into power generation.
CIL’s entry into power generation was mooted back in 2009 when it was planning the IPO. There was a debate then whether a mining company should at all enter power generation. The issue was put on the back burner for some time but came up for discussion again when a pressing need for more coal was felt considering the power capacity addition the country was looking at.
MCL has mines in Sundergarh, which can produce up to 40 million tonne per annum of coal but that cannot be evacuated. So setting up a 2×800 MW super-critical thermal power project would be the best solution to make use of this huge reserves lying unutilised, it was felt.
The in-principle approval for this came from CIL when S Narsing Rao took charge as chairman and managing director. He told this correspondent that CIL would set up a number of pithead power plants in days to come since such projects could generate cheaper power by saving on transportation cost. Sundergarh project was to be first off the table, but the approval process lingered on, until the MCL board on September 17 ratified the proposal and forwarded it to the CIL board for clearance.
MCL chairman and managing director AN Sahay feared that CIL would take a long time in clearing the project since there were no independent directors on the CIL board. But on November 10, the CIL board cleared the proposal and now MCL has to apply to the Centre for land use change. The Odisha government has already given its nod to the project through its State Level Single Window Clearances Authority.
Around 859 acres in Sundergarh’s Gopalpur, Saradega and Tiklipara areas, marked for the 1,600 MW project, was originally acquired for mining. For the power project to come up, 275 families of Tikilipara and 77 families of Saradega village will have to be displaced. This is facing local resistance. MCL officials say the districts authorities are not coordinating with the company to work out a compensation package for the project-affected people. “They (locals) are mainly demanding jobs, along with rehabilitation and compensation. If this is not properly addressed, the project may once again become uncertain”, an MCL official said.
When the project was first planned, the estimated cost was R8,000 crore, which later jumped to R9,000 crore and then to R10,000 crore. Now the CIL board has cleared a detailed project report entailing an investment of R11,000 crore. So with further delay, the cost of implementing the project would become higher.
Once land conversion is done, MCL will have to seek environmental and forest clearances. For forest clearance a detailed reconciliation, as prescribed under the Forest Rights Act, has to be done and this is time-consuming. This will mean it would take MCL at least 18 months to enter the construction phase, if appointment of project contractors gets finalised without any litigation coming in the way. Around 7-8 million tonnes of annual fuel requirement will be sourced from the nearby mines. The Odisha government has offered 50,000 cusec (cubic ft per second) water for the project.
The state is ready to pick up 50% of the power generated. This is over and above the state quota of 15% supplied on a variable cost basis. MCL will use 5% of the generated power and the rest is yet to be tied up. Power Finance Corporation is the project consultant.
A special purpose vehicle, Mahanadi Basin Power Ltd, was formed to implement the project with a joint venture partner, having experience in project implementation. Though initially MCL wanted to offer 74% stake to the JV partner, it was tempered to 51% over time. It is now looking to run the project on a management contract basis.
When it floated the RFQ (request for quotation), MCL proposed a tariff-based international competitive bidding, with bidders having a net worth of at least R2,000 crore and annual turnover of R1,920 crore. It said the SPV will be dismantled once the JV was formed. However, the modalities of the revenue sharing were not decided, one of which could have been the JV partner being allowed to produce power and take its profit, and in the other the JV partner allowed to sell power in the commercial market and share the profits with MCL.
The RFQ document said MCL will have the right of nominating and appointing two nominee directors on the SPV board, of which one would be chairman. The JV partner will have two nominee directors, with one as managing director.
The RFQ had 41 respondents, including CESC, Tata Power, Essar Power and Nalco. But with MCL now looking to operate the plant on a management contract basis, schemes are likely to change. The board is also not likely to be as it was proposed in
the RFQ.
Although MCL has surplus funds, the project may be funded with a mix of debt and equity. If all goes well, miner CIL will have the glory of doubling up as a power producer as well.
(Source: The Financial Express, November 19, 2014)
PUSH INTO POWER MAY EASE CIL’S SUPPLY WOES
KOLKATA: At a time when it is facing flak for its failure to supply fuel consistently to power plants, public sector behemoth Coal India (CIL) has cleared a long-pending proposal to set up a 1,600-Mw (2×800 Mw) pithead power plant at the Sundergarh district in Odisha. While there are questions about whether CIL should initiate such a project at this juncture, experts say the pithead thermal power plant could actually be the way forward in overcoming the challenges of coal transportation.
The idea of mining companies generating power to sell to consumers was mooted almost a decade ago in 2005, when the CIL board gave an in-principle nod to its subsidiary, Mahanadi Coalfields, making a foray into power generation.
Says a senior official of the Central Mine Planning and Design Institute, a CIL subsidiary engaged in the preparation of the project report: “The kind of fuel shortages we talk about now did not exist in 2005. As coal supply was hampered by poor transport infrastructure, CIL thought of going into the power generation business with pithead plants. Had the plan been pushed through at that point, the current scenario would have been different.”
The model remains relevant even today because coal supply continues to suffer from the problem of inadequate infrastructure in many parts of the country. “There were two such plans for pithead plants: one in Sundergarh and another in Rajmahal,” says Partha S Bhattacharya , former chairman and managing director of CIL. “If the Mahanadi Coalfields project has now been approved, it is a welcome decision. Coal evacuation has remained a problem in such areas and that is why the pithead thermal power plant was planned.”
Mahanadi Basin Power, a special purpose vehicle set up by Mahanadi Coalfields, will erect the power plant at an estimated investment of Rs 11,000 crore. According to A N Sahay, chairman of Sambalpur-based Mahanadi Coalfields, nearly 800 acres in the coal-rich Sundergarh district have been earmarked for the project. However, officials say that since the land was originally acquired for mining, the proposed power project would need the government’s clearance for the change in end use. It would also need forest clearance because the land has a substantial forest component.
While the 7-8 million tonnes annual fuel requirement for the plant can be sourced from nearby mines, the Odisha government has offered 50,000 cusec (cubic feet per second) water for the project. Although a power purchase agreement is yet to be tied up, CIL officials indicate that the Odisha government is likely to be the buyer.
Last year, when CIL and National Thermal Power Corporation were engaged in a public spat over fuel shortage, then CIL chairman and managing director Narsing Rao had pointed out that the country needed a little over 300 km of additional rail connectivity to become self-sufficient in power. He had argued that a 100-km stretch in Jharkhand, a 50-km link in Odisha, and a 180-km line in Chhattisgarh could make a 300-million tonne difference to the annual coal supply to power plants.
There was talk of a freight corridor to address the issue of non-availability of rakes for coal supply. Even in a recent letter to Prime Minister Narendra Modi, Odisha Chief Minister Naveen Patnaik asked for dedicated rail corridors in the Angul-Talcher and Basundhara coal belts in Jharsuguda that would cover the operational area of Mahanadi Coalfields.
With even the sanctioned western and eastern dedicated freight corridor projects lagging behind schedule, CIL may be expected to continue its struggle with coal evacuation in the near future. That is why, say experts, the mining company’s pithead plants could be a model for circumventing the problem of transporting coal, especially from remote areas.
The power generated, of course, also needs proper infrastructure for transmission, but that is more easily put in place compared to the road or rail infrastructure required. “You don’t need as much land to put up transmission lines. When the mines are in remote areas, it is certainly wiser to provide a finished product than supply coal to distant plants,” says Bhattacharya. In the case of the proposed Sundergarh plant, a line of Grid Corporation of Orissa already exists close to the site.
The model also offers the opportunity to engage private players. In 2012, Mahanadi Basin Power had initiated the process to set up the power plant through a joint venture with a private player. This had evinced the interest of all major private companies in the sector, including Tata Power, Adani, Nalco, GMR and Essar Power. “Yes, there was a plan to rope in a private player, but it did not materialise. Mahanadi Basin Power is currently a wholly-owned subsidiary of Mahanadi Coalfields,” says Samant Ray, general manager of the company. Although Ray did not comment on the company’s plans, Sahay had recently indicated that the Sundergarh plant would run on a management contract basis.
“There has been so much talk about the public-private partnership model in mining. For CIL, it would be fairly easy to get private companies as partners for pithead power plant projects,” says a senior CIL official. “And the logic that CIL should focus on mining would stand as the company would then do little other than provide the land, coal and some investment.”
Because augmentation of the infrastructure is not happening any time soon, cash-rich CIL may have rightly decided that it was time to rethink investments in pithead power plants and join hands with private power players.
(Source: Business Standard, November 19, 2014)
