India's CEA Reports Coal Shortage Likely to Hinder Coal-based Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's state-run Central Electrical Authority (CEA) (New Delhi) has said that an ongoing shortage of coal may force the country's coal-based power plants to cease operations. According to an internal report released by the CEA in October, India would face a shortage of 74 million tons of coal in 2012, necessitating the import of about 50 million tons.

India intends to add 78,700 megawatts (MW) of power generation capacity during the ongoing 11th five-year plan period (2007-12), and 100,000 MW of power generation capacity during the 12th five-year plan period (2012-17). During the 11th period, thermal power projects will account for 59,693 MW of power generation capacity, while the 12th plan period will see the addition of 75,200 MW of thermal power. Coal shortage is expected to reach 120 million tons after the completion of projects planned for the 11th period.

According to the CEA, India's annual growth in overall power generation was 7.5% in September, but it could have been 9.8% had the plants of leading thermal power company NTPC Limited (BSE:532555) (New Delhi) been supplied with sufficient coal. Due to a severe shortage of coal, NTPC has halted operations of two units each at its 1,600-MW plant at Farakka in West Bengal and the 2,340-MW Kahalgaon plant in Bihar. Both plants had been running at 50% plant load factor during the last few months because of delays in coal imports. NTPC will require about 150 million tons of coal during 2009-10. The higher calorific value of imported dry coal makes 12.5 million tons of imported coal equivalent to 19 million tons of domestic coal.

State-run Coal India Limited (CIL) (Kolkata, West Bengal) has indicated that coal production during the 12th plan period will increase by 100 million tons, but that is not sufficient to meet the requirements of even the 11th plan period. On the other hand, the CEA has said that there is no visible coal reserve for linkage to projects under the 12th plan, while more than 100,000 MW worth of project applications are awaiting coal linkages. Several captive power projects are similarly waiting for coal linkages. The CEA and power developing companies have stressed the need to consider equity participation in overseas coal mining projects to ensure energy security and availability of coal.

India has 10% of the global coal reserves, but imports have grown tremendously from zero about five years ago to more than 70 million tons during the current fiscal year. Imported and domestic coal may be blended only to about 10% of the total coal available because of the higher calorific value of the imported coal. Blending a higher quantity could damage the existing boilers.

India's imported coal supply could receive a further setback if Indonesia decides to act on its plan of restricting coal exports to meet the domestic demand. Indonesia is India's second-largest supplier of coal. Several Indian companies, such as Reliance Power Limited (BSE:532939) (Mumbai) and Tata Power Company Limited (BSE:500400) (Mumbai), have acquired coal mines in Indonesia to meet their feedstock requirements in India. Several other Indian companies, such as NTPC, have been exploring possibilities of acquiring Indonesian coal mines to fulfill the needs of their projects in India.

Coastal projects, such as the ultra-mega power projects in Krishnapatnam in Andhra Pradesh and Mundra in Gujarat, each with a generation capacity of 4,000 MW, are to be operated completely with imported coal. Imported coal is best used by coastal projects since transportation charges are lower.

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