PMO strictures force CIL into action,rolls out plan to augment supply

Also,the allocation to the power sector is to be ramped up at the expense of supplies to non-priority sectors such as steel and cement.

Implementation of the PMOs directive to Coal India Ltd for ramping up supplies to the power sector,coming at a time when the mining majors coal output in the nine months of this fiscal fell short of even last years levels,hinges largely on a three-pronged strategy to immediately boost output. One,the forward e-auctions being carried out by CIL are to be discontinued for now. Also,the allocation to the power sector is to be ramped up at the expense of supplies to non-priority sectors such as steel and cement. And thirdly,a loosening up of the environmental norm restrictions to enable an output boost at existing mines has been proposed.

These decisions were taken at a Standing Linkages Committee meeting that took place on Tuesday,just a day ahead of Wednesdays statement issued by the PMO. In the wake of the PMOs intervention,CIL has said that it has now started intensive monitoring up to the mine level to ensure better production and productivity. During the third quarter ending December 2011,CIL said it has enhanced its off take to 110 million tonnes (MTs) compared to 93 MTs during the second quarter (July-September) of 2011. Also,during January 2012,there was a 5 per cent increase in the availability of rakes and CIL claims it has managed to extract assurances from Railway authorities for at least 10-12 extra rakes per day for evacuation of coal,which will enhance the offtake to power houses and other consumers.

To increase production in mines,which are reaching peak capacity,environmental clearance for additional 25 per cent capacity has been actively taken up for consideration of Ministry of Environment and Forests (MoEF). A meeting was held in this regard on February 11 with Secretary,MoEF. Earlier this week,the CIL Board has also approved the Amrapali Project situated in North Karanpura Area of Central Coalfields Limited for a capacity of 12 MTs per annum which will contribute 1.5 MTs additional production in the coming year.

In the nine months ended December 31,Coal India had reported a 3 per cent drop in production to 291.2 MTs,according to a February 13 statement issued by the coal major. Operations were curbed by heavy rains,while the development of new mines was hampered by delays in land acquisition and environmental approvals.

The proposed three steps,officials who attended the inter-ministerial coal linkages committee meeting,should ensure that there is incremental coal supply for the power sector till the time CIL increases production. But there are niggling issues that need to be ironed out in the interim. According to officials,despite the assurance of incremental domestic coal supplies,upcoming projects will still have to resort to some amount of blending with imported coal to achieve a plant load factor of 80-85 per cent. Besides,even though projects are required,as a precondition to qualify for the coal allocation,to ink firm power purchase agreements or PPAs with distribution utilities,the standard bidding documents (for Case 1 bidding,where developers bidding the lowest delivered tariffs get to supply electricity to a distribution utility) are still under preparation.

According to a Wednesdays PMO statement,CIL has been asked to sign firm FSAs with power utilities for maintaining the full quantity of coal mentioned in the Letters of Assurance (LoAs) for a period of 20 years,with trigger level of 80 per cent for levy of disincentive and 90 per cent for getting an incentive. Coal India had been insisting on signing FSAs with assurance of only 50 per cent of the required quantity,which the industry has cited as grossly inadequate; with the result that no FSAs had been signed since April 2009.

Tuesdays Standing Linkage Committee meeting,it is learnt,also resolved to extend the LoAs issued by CIL for 14 private power projects that were originally supposed to come up by March 2012,the terminal month of the Eleventh Plan,but have now been pushed forward into the Twelfth Plan period (starting April 1,2012). There were worries that these projects,which have achieved most of the construction milestones but actual commissioning is likely to spill over beyond March 2012,could see their LoAs cancelled.