India puts power projects based on imported coal under review

KOLKATA (miningweekly.com) – A pall of uncertainty has been cast over Indian thermal power stations running on imported coal, as the country is moving into surplus production and even considering options to export coal.

The Coal Ministry has directed all government-owned and -operated thermal power generation companies to desist from importing coal for their feedstock requirement, and against this backdrop questions have been raised about costs, risks and the viability of imported coal-based mega thermal projects currently on the anvil.

Various government departments had raised questions about the risk that projects based on imported coal would seek frequent electricity tariff revisions, following changes in the international trading environment.

These power station projects had been conceived during times of domestic coal shortage; however, continuing with their implementation when the country was moving into a surplus situation was not considered to be prudent, a Coal Ministry official has said.

Citing examples, the official pointed out that earlier this year, the Appellate Tribunal for Electricity had revoked a 2014 order allowing Adani Power and Tata Power to seek higher or compensatory tariff revisions in the face of the Indonesian government changing benchmark pricing for coal exports. The Indian power plants had been implemented based on the assumption of continued supply of cheap coal from Indonesia.

Government officials said that such risks were not necessary any more as India had sufficient domestic coal available.

The government has awarded ultra mega power plant projects (UMPPs) to investors through competitive bidding, based on electricity tariffs they proposed. The surplus domestic coal situation had obfuscated plans for UMPPs so much that four such projects with aggregate generating capacity of 16 GW had been cancelled, while the future of one planned in the southern Indian province of Tamil Nadu was uncertain, the official added.

In a roadmap, the Coal Ministry had proposed complete self-sufficiency in coal within the next three years and such a target had made import-based UMPPs superfluous, the official said.

Indian coal imports in April and May 2016 were down 5% at 35.85-million tons over the corresponding period of the previous year, according to government data.

With a target to produce one-billion tons a year, Coal India Limited (CIL) produced 125.65-million tons in the quarter ended June 2016, up 3.5% on the corresponding quarter of 2015 with a total production target of 598-million tons for the financial year.

The surplus situation was indicated by lower offtake of 2.9% during the quarter ended June at 133.19-million tons and a pithead inventory estimated at 30-million tons.

In a statement, Coal Secretary Anil Swarup said “consequent to record production of coal by CIL, it is now exploring avenues to export coal”.

For starters, an Indian delegation recently visited Bangladesh to explore opportunities to export coal to the thermal power plant that India’s NTPC was building in the neighbouring country.

Coal Ministry officials said that with coal exports on the cards, imported coal-based thermal power plants had lost relevancy and all such projects were under review, starting with scrutiny by the Finance Ministry.