CIL set to offer additional coal from domestic sources but with riderhttps://indianexpress.com/article/news-archive/web/cil-set-to-offer-additional-coal-from-domestic-sources-but-with-rider/

CIL set to offer additional coal from domestic sources but with rider

Even as it struggles to provide full quota of coal linkage to new power plants,Coal India is set to offer additional coal from domestic sources to the extent of 5% contracted quantity if consumers agree to lift this fuel directly from the pit head,making their own transport arrangement.

Even as it struggles to provide full quota of coal linkage to new power plants,Coal India is set to offer additional coal from domestic sources to the extent of 5% contracted quantity if consumers agree to lift this fuel directly from the pit head,making their own transport arrangement.

The move will benefit close to 36,000 MW of power projects,including those of Adani,Jindals and Indiabulls,as they could further reduce the generation cost of their plants by having higher quantity of domestic coal that is priced at almost half of the landed cost of coal from international markets.

Under the terms of the fuel supply agreement (FSA) finalised by CIL,it has promised to supply 80% of annual contacted quantity to power plants coming up between April 2009 and March 2015,with only 65% of this coming from domestic sources in the first two years of supply.

With the provision of additional 5% coal,plants could reach 70% of their rated capacity on domestic fuel itself,negating any need for seeking imports of coal immediately,especially when power state utilities are reluctant to buy power.

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Of the 78,000 MW of projects with which CIL will ink FSAs,36,200 MW has already been commissioned.

“We have coal stocks of close to 60 million tonne at pitheads that has built up over time as a few linked customers have not lifted the agreed quantity of coal and,also due to issues regarding availability of rakes from the railways. If customers are willing to make their

own transportation arrangement,we could give additional 5% coal to them,” said a top official of CIL,asking not to be named.

The power and coal ministries have also favoured such exercise from CIL and the matter came up for discussion during the CCEA meeting that allowed additional cost of imported coal as pass-through in tariff of tariff-based power projects.

CCEA has also directed CIL to institutionalise this mechanism and consider even higher allocation on case-to-case basis depending on stock position.

Though CIL has been offering this option to willing consumers for some time,and it has helped to reduce pithead coal stock from over 80 million tonne last year to about 60 million tonne now,it will be the first time that such an arrangement would be worked out in the FSAs.

CIL is expected to supply 379 million tonne of coal to the power sector in 2013-14 from domestic sources,leaving the balance 78 million tonne to be imported for use by power projects.

If 5% of additional coal is provided to new power projects,the 36,000 MW-worth of commissioned plants could receive in excess of 20 million tonne of coal in 2013-14 and even higher quantity if CIL agrees.

“This is a good option given by CIL through its agreement with us. But power companies will need to figure out the economics of lifting the pithead coal,” said a top official of a leading private sector power company.

The measure would be additional relief to the power sector that has now been allowed to claim higher cost of imported coal through an upward revision in power tariff.

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During 2012-13,CIL dispatched 465 million tonne of coal,registering a growth of 7.4% over the dispatches made during 2011-12 and an overall achievement of 99% of the target.