)
At a time when it is facing flak for its failure to supply fuel consistently to power plants, public sector behemoth Coal India (CIL) has cleared a long-pending proposal to set up a 1,600-Mw (2x800 Mw) pithead power plant at the Sundergarh district in Odisha. While there are questions about whether CIL should initiate such a project at this juncture, experts say the pithead thermal power plant could actually be the way forward in overcoming the challenges of coal transportation.
The idea of mining companies generating power to sell to consumers was mooted almost a decade ago in 2005, when the CIL board gave an in-principle nod to its subsidiary, Mahanadi Coalfields, making a foray into power generation.
Says a senior official of the Central Mine Planning and Design Institute, a CIL subsidiary engaged in the preparation of the project report: "The kind of fuel shortages we talk about now did not exist in 2005. As coal supply was hampered by poor transport infrastructure, CIL thought of going into the power generation business with pithead plants. Had the plan been pushed through at that point, the current scenario would have been different."
An evergreen model
The model remains relevant even today because coal supply continues to suffer from the problem of inadequate infrastructure in many parts of the country. "There were two such plans for pithead plants: one in Sundergarh and another in Rajmahal," says Partha S Bhattacharya , former chairman and managing director of CIL. "If the Mahanadi Coalfields project has now been approved, it is a welcome decision. Coal evacuation has remained a problem in such areas and that is why the pithead thermal power plant was planned."
Mahanadi Basin Power, a special purpose vehicle set up by Mahanadi Coalfields, will erect the power plant at an estimated investment of Rs 11,000 crore. According to A N Sahay, chairman of Sambalpur-based Mahanadi Coalfields, nearly 800 acres in the coal-rich Sundergarh district have been earmarked for the project. However, officials say that since the land was originally acquired for mining, the proposed power project would need the government's clearance for the change in end use. It would also need forest clearance because the land has a substantial forest component.
While the 7-8 million tonnes annual fuel requirement for the plant can be sourced from nearby mines, the Odisha government has offered 50,000 cusec (cubic feet per second) water for the project. Although a power purchase agreement is yet to be tied up, CIL officials indicate that the Odisha government is likely to be the buyer.
Last year, when CIL and National Thermal Power Corporation were engaged in a public spat over fuel shortage, then CIL chairman and managing director Narsing Rao had pointed out that the country needed a little over 300 km of additional rail connectivity to become self-sufficient in power. He had argued that a 100-km stretch in Jharkhand, a 50-km link in Odisha, and a 180-km line in Chhattisgarh could make a 300-million tonne difference to the annual coal supply to power plants.
There was talk of a freight corridor to address the issue of non-availability of rakes for coal supply. Even in a recent letter to Prime Minister Narendra Modi, Odisha Chief Minister Naveen Patnaik asked for dedicated rail corridors in the Angul-Talcher and Basundhara coal belts in Jharsuguda that would cover the operational area of Mahanadi Coalfields.
With even the sanctioned western and eastern dedicated freight corridor projects lagging behind schedule, CIL may be expected to continue its struggle with coal evacuation in the near future. That is why, say experts, the mining company's pithead plants could be a model for circumventing the problem of transporting coal, especially from remote areas.
The power generated, of course, also needs proper infrastructure for transmission, but that is more easily put in place compared to the road or rail infrastructure required. "You don't need as much land to put up transmission lines. When the mines are in remote areas, it is certainly wiser to provide a finished product than supply coal to distant plants," says Bhattacharya. In the case of the proposed Sundergarh plant, a line of Grid Corporation of Orissa already exists close to the site.
Open to private play
The model also offers the opportunity to engage private players. In 2012, Mahanadi Basin Power had initiated the process to set up the power plant through a joint venture with a private player. This had evinced the interest of all major private companies in the sector, including Tata Power, Adani, Nalco, GMR and Essar Power. "Yes, there was a plan to rope in a private player, but it did not materialise. Mahanadi Basin Power is currently a wholly-owned subsidiary of Mahanadi Coalfields," says Samant Ray, general manager of the company. Although Ray did not comment on the company's plans, Sahay had recently indicated that the Sundergarh plant would run on a management contract basis.
"There has been so much talk about the public-private partnership model in mining. For CIL, it would be fairly easy to get private companies as partners for pithead power plant projects," says a senior CIL official. "And the logic that CIL should focus on mining would stand as the company would then do little other than provide the land, coal and some investment."
Because augmentation of the infrastructure is not happening any time soon, cash-rich CIL may have rightly decided that it was time to rethink investments in pithead power plants and join hands with private power players.
