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In less than 18 months, the government has successfully resolved the single-largest hurdle to growth in the power sector — lack of firm coal supply agreements that had dampened investor confidence and forced the chief executives of 20 top private power companies to declare a crisis in February last year.
At that time, the chief executives had knocked on the doors of the Prime Minister’s Office (PMO), the finance ministry, the Planning Commission and the coal and power ministries, complaining the lack of fuel supply agreements (FSAs) had made fresh investment worth thousands of crores unviable.
By September 6, Coal India Ltd (CIL) would sign fuel supply agreements for new projects with a capacity of 78,000 Mw commissioned between April 2009 and March 2015. Assuring coal supply for this capacity required CIL to sign 131 FSAs; it has already signed 92 FSAs for 42,000-Mw capacity projects. With agreements already in place for projects commissioned before March 2009, next week’s mega FSA signing drive would ensure firm fuel linkages for every power plant, either operational or likely to come on stream by 2015. (BETWEEN AIMS AND ACHIEVEMENTS)
The major beneficiaries of the firm coal supply agreements to be signed next week include Adani Power, GMR Energy, Lanco Power, DB Power Ltd and Vedanta Group’s Talwandi Power.
Resolution of the fuel supply issue follows the recent record capacity addition.
Last financial year, India added 20,622 Mw of capacity, 2,666 Mw more than the 17,956 Mw targeted during the year.
An additional 2,512 Mw of capacity was added in the quarter ended June 2013; a total capacity of 23,134 Mw has been added in the first 15 months of the 12 th Plan period, 26.2 per cent of the total target of 88,000 Mw. Also, about 60 per cent of this capacity, is accounted for by the private sector alone, another record. This, a time when investor confidence is said to be an all-time low.
Not surprisingly, power deficit has fallen to a historic low across states. Six states and Union territories — Chandigarh, Uttarakhand, Madhya Pradesh, Dadra & Nagar Haveli, Lakshadweep and Sikkim — reported zero deficits in June.
Six other states recorded less than one per cent deficit — Rajasthan (0.4 per cent), Gujarat (0.1 per cent), Odisha 0.2 (per cent), West Bengal (0.5 per cent), Manipur (0.9 per cent) and Meghalaya 0.4 (per cent).
Power prices in the spot market have dipped to a record low of about Rs 2 a unit. Coal prices at e-auctions fell 15-20 per cent in the quarter ended June.
“There has been a significant oversupply of coal at power stations. More than 22 mt (million tonnes) of coal is currently stocked at power plants. This is in addition to the 46 mt coal lying at our pitheads. This is a record high supply,” a senior CIL executive told Business Standard.
However, the government’s FSA signing drive has come at a cost. It has meant two presidential directives to CIL to overrule the company’s board in April 2012 and July 2013. The government has also asked the company to import coal to meet the supply shortage. The burden of the high cost of imports would be passed on to consumers.
Bu 2015, CIL would have to supply 252 mt of coal to power companies, over and above the obligation for pre-2009 FSAs. About 32 mt of the additional requirement would be met through imports.
The miner is gearing up to import seven mt of required for this financial year. According to the new FSAs being signed, CIL would have to supply 65-75 per cent of the annual contracted quantity of new power stations in the remaining four years of the 12 th Plan.
