Coal issues dog Essar's Jharkhand project

Half completed, plant awaits fuel linkage

Essar Power’s Tori project in Jharkhand is stuck for lack of coal, despite a spurt in the fuel’s supplies in the country.

“The 1,200 Mw project is almost 50 per cent complete. It would have been completed by now but financial institutions have stopped disbursement of funds,” said K V B Reddy, chief executive officer, Essar Power.

Banks check for power purchase agreements (PPAs) and fuel supply before lending to power generation projects. “If the coal blocks had been with us, the plant would have been operational,” Reddy said.

Essar Power had two coal blocks, at Chakala and Ashok Karkata in Jharkhand. These were deallocated on a Supreme Court order in 2014. The pit-head plant has 98 per cent of its power output tied up with Bihar and Jharkhand.

“We are waiting for coal linkages. We have sought extensions from the state governments for the PPAs,” Reddy added. The plant requires 5.5 million tonnes of coal a year. “It is located in the middle of Central Coalfields Ltd. We understand a good amount of production has happened there. Surplus coal is available,” he said.

Essar Power’s application is pending with the Centre. “We stand ahead of many players, and we should receive the linkage,” Reddy said.

The company’s 1,200 Mw coal-fed plant at Salaya in Gujarat is running on Australian and Indonesian coal. Another 1,010 Mw captive plant for an oil refinery in Vadinar will be transferred to Rosneft after completion of the Essar Oil sale.

 

 

For its 1,200 Mw Mahan project in Madhya Pradesh, where one unit of 600 Mw is working, Essar Power is buying two million tonnes of coal through e-auctions. The price at the pit-head is Rs 1,100 a tonne but taxes and transportation costs more than double it to Rs 2,800, according to Reddy.

Essar Power bagged the Tokisud captive mine for the Mahan project last year. Reddy said the mine was likely to start production in three months. Essar Power is investing about Rs 10,000 crore in the Mahan plant.

Reddy said private players had added a lot of capacity in the past few years. “Coal production in the past four years was not sufficient. This year, coal supply has improved, but there isn’t sufficient power demand,” Reddy said.

“Once the government’s vision of 24x7 power for all by 2019 materialises, a good amount of transmission and distribution connectivity will have to take place. If these two things happen, stranded power plants will flare up,” he added.