Coal supply to hinge on use

Faced with an increasing shortage of coal in the country, the government is planning to tighten supply by asking coal users to furnish a letter of comfort certified by financial institutions while seeking a linkage.

The government is insisting on a letter of comfort after finding that many companies are not using their linkages.

The reasons for linkages lying idle ranges from a plant becoming sick or being unable to add more capacity to companies opting for better variety of imported coal.

Officials said, Aditya Power, Sterlite Optical Technologies, Bhadravati Power, Ind Bharat Energy Ltd and KVK Neelanchal Power Company, had requested an inter-ministerial committee on coal linkages to allocate 23 million tonnes of coal.

The committee, in its recent meeting, decided that coal companies in consultation with the power ministry and financial institutions, would work out details of the letter.

"Companies will be asked to declare a time schedule by which they expect to achieve project milestones, failing which their linkages could be cancelled," said a coal ministry official.

"The demand for coal linkages was not very high till two years back. The spurt in demand was owing to an increase in global coal consumption and companies relying more on domestic coal," said an official.

The increase in thermal power generation also added to an increase in the demand for coal. The plant load factor (PLF) of power houses has gone up from 69 per cent in 2000-01 to 75.2 per cent in 2004-05.

The increase in PLF has adversely affected coal supply to the non-core sector. This sector has about 2,800 linked consumers even after Coal India recorded its highest-ever production of 323.64 million tonnes. The Planning Commission has projected a demand-supply gap of 55 million tonnes for 2006-07 and 95 million tonnes for 2011-12.

Officials said coal supply for power generation was given priority over other sectors since power cuts lead to public pressure. "Demand for coal will increase with the increase in economic growth. This is because supply of other sources of energy like natural gas is not likely to increase substantially in near future," said an official.