The government seems to be preparing the power sector for low fuel availability. In the next Five-Year Plan, it is looking to reduce power capacity from Coal India Limited (CIL)’s linkages. If the plan is carried out, the trend of huge capacity additions and low coal supply would be checked.
In a meeting to be convened this week, senior officials from the coal ministry, the power ministry and the Planning Commission would debate the need to freeze capacity of power projects for which CIL would supply coal in the 12th Five-Year Plan. The Plan has an ambitious target of 100,000 Mw of capacity.
The move is being cheered by many in the sector, as reduced targets would lead to more coal for a limited number of projects. While reduction in the power capacity addition target might be a dampener for the sector, industry experts say if befitting power projects receive coal linkages, it could be good news. A number of companies, including Adani Power, Tata Power and Larsen & Toubro, have said they would plan more projects after there was more clarity on coal.
Also, projects approaching commissioning and those in which work has already started would be prioritised for coal linkages. “There are many power projects which exist on paper, and promoters are looking to get a coal linkage allotment. This, they would later sell to other promoters, based on the linkage. If the move goes through, such sales would stop,” said an industry expert.
Power minister Sushil Kumar Shinde had earlier said no one had expected the power sector to add capacity in the 11th Plan so quickly. Increased private sector participation had hastened the pace of addition, though only 64 per cent of the proposed 78,000 Mw was achieved.
Severe constraints in raising production had limited CIL’s coal linkages for long-term fuel supply to the power sector this financial year to 347 million tonnes. It had committed 335 million tonnes of fuel linkages for power plants in 2010-11.
The shortage of coal has led to low capacity utilisation in many power projects. Six new projects, with a combined capacity of 5,940 megawatts, commissioned in 2011, are operating at a plant load factor (PLF) of 57 per cent. This is much lower than some plants commissioned in 2010, at 74 per cent PLF.
A committee, to be chaired by the additional secretary of the coal ministry, would review the existing linkages to the power sector, as well as letters of allotment. It would also take a look at cases approved by the power ministry.
New linkages could bring many projects back on the track. “Rather than giving fresh linkages to new projects that are yet to achieve financial closure, CIL should focus on maximising coal supply to projects that are completed or about to be completed. This would ensure the capacity available in the country is optimally utilised,” said Debashish Mishra, senior director, Deloitte Touche Tomatsu.
