A severe and unprecedented fuel crunch has stalled development of critical power projects worth Rs 12,000 crore in Karnataka. The concerns led Chief Minister B S Yeddyurappa to discuss the issue with Prime Minister Manmohan Singh here today.
Karnataka, which has the highest state GDP growth rate of 8.2 per cent among the four southern states, does not possess fuel resources of its own and depends on coal blocks and gas supply allocated by the central government. This was Yeddyurappa’s fifth meeting with the PM in the past three years over the issue.
States ruled by the Bharatiya Janata Party (BJP) and National Democratic Alliance have been complaining of discrimination by the Union government while allocating coal blocks, especially in power generation. Karnataka is also ruled by the BJP. “We are going to discuss with the Prime Minister the issues of coal and gas shortages for our plants where investments worth Rs 12,000 crore are lined up, but are not getting materialised in the absence of fuel availability,” Yeddyurappa told Business Standard before the meeting.
The BJP’s national executive in Lucknow last month had passed a resolution asking for the states ruled by it to come together and put pressure on the central government.
Karnataka is upset with the Centre’s alleged indifference to the fuel shortage being faced by its upcoming power plants for more than three years and is now compelled to look at acquisition of coal assets abroad, becoming the third state after Andhra Pradesh and Maharashtra to do so.
After meeting the PM, Yeddyurappa handed him a detailed note on the capacity and investments stuck in the state due to non-availability of fuel linkages.
“Investments worth over Rs 5 lakh crore were committed by industry in the state during an investors’ meet in June. However, the prospects now seem grim as we have land, water and money but no coal and gas,” he said.
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The state had earlier chalked out plans for an overall power capacity addition of 8,200 Mw to bring down its power deficit of 2,100 Mw, against a demand of 8,500 Mw of electricity annually. With the development of these plants, the state also hoped to cut down its power import bill of over Rs 1,200 crore every year. However, thanks to the coal shortages, a major chunk of this capacity is set to be hit.
The big-ticket projects which have come to a halt include the 1,600-Mw Yermarus thermal power plant and the 700-Mw Bellary super thermal project. While orders for equipment for both the projects have already been placed on the state-owned Bharat Heavy Electricals Ltd, civil work has stopped due to the absence of coal allocation. Financial closure for the projects could not be achieved as lenders insist on coal linkage.
Other projects facing the heat include the 800-Mw Edlapura thermal power plant and the 1,600-Mw Godhna super-critical thermal power project, proposed to be developed in Chhattisgarh.
While land has been acquired and preliminary clearances obtained for both the projects, work has stopped in the absence of environmental clearances as the environment ministry is insisting on coal linkages.
“In the absence of coal linkage and environmental clearances, the capacity addition will suffer, adversely affecting the state’s planned growth rate in the 12th Plan,” Yedyurappa told the PM. The chief minister also informed the PM of the concern over the increased power cost that would accompany the strategy of heavy reliance on imported coal.
The southern state is looking at Indonesia and Australia as possible geographies to source coal from. “We are looking at possible joint ventures in the two countries to meet our shortfall of coal,” Yedyrappa said. Recent policy changes in the two nations, however, have made imports of coal costly.
“Coal imports by a state utilities on their own are advisable only when there is huge quantum of import involved in view of relative bargaining power. Importing coal, for a state like Karnataka, could put a burden of up to roughly 25-30 per cent additional cost on per tonne basis on the state utility, as compared to sourcing coal domestically,” said Dipesh Dipu, director of mining practice at consultancy firm Deloitte.