Costly imports of coal unfortunate as nation has huge reserves: NTPC

No projects stranded due to lack of fuel, the Chairman tells Sudheer Pal Singh & Jyoti Mukul in a Q&A

India’s power generating companies are facing the heat of a historic fuel supply crunch. Arup Roy Choudhury, Chairman and Managing Director (CMD) of the country’s largest electricity producer NTPC Ltd tells Sudheer Pal Singh & Jyoti Mukul in an interview that the fuel crunch along with the costly imports of coal is unfortunate given the nation has a huge coal reserve base. Edited excerpts.. 

Q. How far has the capacity addition in power generation been impacted considering that there is stranded capacity due to fuel shortage?
We are fortunate that we have no such project which is stranded due to want of fuel.  NTPC goes ahead with its projects after the fuel tie-ups are in place. But we are aware of some power projects in the country which are stranded due to fuel shortage. This is unfortunate in a power starved country like ours with ample coal. I will not like to comment further on the subject as those projects do not belong to us.

Q. How do you look at the dependence on imported coal?
The future of Indian power generation is through domestic coal. And the coal industry must grow at the same rate as the power sector. How can we base our growth on some other country’s resources? We cannot. Therefore, we must consume our own resources first.

Q. Being a government company and the biggest in the sector, are you in a better position to get coal compared to other power companies.
We always get much less than what we require. But our supply has grown. Our requirement for the current year is 160 MT. The CIL Chairman has assured us that NTPC will get 10% more coal over last year’s supply. Fuel Supply Agreements (FSAs) are in place for meeting this coal requirement. We have no dispute with Coal India on the issue of FSAs. But the fact remains that India is producing around half a billion tonne of coal every year and we need to double our production. What is the fun in increasing profitability by raising prices? Productivity must be increased if business is to be done.

Q. How far setting up of regulator for the coal sector will help?
In my view, setting up a regulator is the best option. This is because it would act as a single point of contact for anybody who wants to invest in the coal sector. There would also be transparency on account of quality, production and pricing of coal.  If NTPC is investing money today, it is because we know there is a power regulator to ensure my return. If we can set up power regulator to reform the power sector, why can we not have a regulator for the coal sector. 

Q. What is your view on price parity in coal?

How can we talk about international price parity when we do not have international quality of coal? We have over 40% ash content in our coal, sometimes with calorific value of less than 3,000 kilo calorie per Kilogram. Sometimes people talk in isolation without realizing the situation on ground.

Q. Do you think the efforts of the Prime Minister's Office (PMO) in getting the Fuel Supply Agreement (FSA) issue resolved helped?

The initiatives taken by PMO have definitely helped because, at least, Coal India Ltd. has now committed to signing FSAs; the issue was stalled since 01-04-2009. This had put a lot of generators into various kinds of problems. Although, FSAs are not to the liking of many generators, but looking positively, at least, there is a commitment which has been made by Coal India Ltd. even if the commitment will fructify in the next 3 – 4 years. As far as NTPC is concerned, we do not foresee it as a major issue because we are able to get the coal which is required to run our plants. We have also been able to bring in Coal India Ltd. at the same platform,  as far as the conditions of FSAs are concerned;  thus will not affect our existing stations because all the FSAs are for our expansion Units at the plants for which we already have the existing FSAs with Coal India Ltd.

Q. How would NTPC prices go up as a result of pooling of coal?

CEA is saying 10 paisa per unit would be the overall increase in tariff. We have no issues with this as long as everybody, including the consumers, is willing to pay. Ultimately, the extra cost will have to be paid by the State Electricity Boards (SEBs). The paying ability of the SEBs has not improved over the past some years. So, maybe this proposal will again burden them. They have to take a call.

Q. How would 21% import duty on power equipment impact NTPC?

Any increase in import duty will lead to higher project cost which in turn will increase the cost of power. This will also restrict participation from the foreign equipment manufacturers in the bidding process thereby reducing the competition.