India Must Increase Coal Imports to Meet Power Generation Growth Rate, an Industrial Info India Exclusive

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Researched by Industrial Info Resources (Sugar Land, Texas)--In a recent interview, the Central Electricity Authority (CEA) and state-owned thermal and coking coal producer Coal India Limited (CIL) (Kolkata, West Bengal) told Industrial Info Resources that the only short-term solution to overcome the coal deficit issues facing power plant operators in India is to import raw material.

"There is definitely an overall demand-supply mismatch in the thermal coal industry," a senior CIL official said. "Power production units are mushrooming in the country so fast, that even the maximum growth of 9% to 10% achievable by coal producers is not enough to meet that demand."

He said that the country needs to ramp up thermal coal imports on a war footing. "In the long term, it would be necessary to set up many more coast-based power units, so that transport of imported coal becomes easier," the CIL official said. "It will also be important to get more up-to-date technology from international markets to make coal production more efficient."

According to CEA, mine-mouth power plants require a week's worth of stocks on average, whereas plants located away from coal mine pitheads would require at least 15 days of stocks. "It would be beneficial to have power plants closer to the pitheads of the coal mines for easier transport of domestic coal and closer to the coast, for faster imported coal transport," officials said.

CEA alluded to India's 11th- and 12th-year plans, by virtue of which many more captive coal mines and coal blocks will be allocated, providing more coal linkages in the future.

These discussions followed March 31 CEA data about thermal coal stocks at power plants across the country. According to reports, nearly 80 thermal power plants country-wide were facing serious issues with lower-than-normal coal stock levels. Of these, more than 19 plants were in "critical" condition, with less than seven days' worth of coal stocks. Half of these 19 were "super critical," with just four days of stocks left.

Six of the 19 critical thermal power plants were in the regions of Mejia, Kolaghat, Santaldih, Bakreshwar, Farakka and Sagardihi, all concentrated in the eastern state of West Bengal. Coal stocks at the 1,340-MW Mejia plant and 1,050-MW Bakreshwar plant were super critical at 18,000 tons and 10,000 tons, respectively, as of March 31, which was enough for just one day.

The other affected plants include three in Gujarat, two in Rajasthan, two in Tamil Nadu, another two in Bihar, and one each in Orissa and Chhattisgarh.

"These reports are just sourced from coal stock data, which we monitor on a daily basis," the CEA officials informed IIR. "Low coal inventories certainly don't imply stoppage of power production. Many of these plants have fuel supply agreements in place with coal producers, so the coal keeps coming through, although there are delays depending on availability of wagons."

A global consultant told local media, "There has been a persistent problem of inadequate rakes to carry coal." A rake is a cluster of train wagons which have to be applied for, for domestic rail transport of bulk commodities such as coal and iron ore.

The Indian Ministry of Railways recently denied the wagon-shortage allegation, blaming CIL for being unable to utilize efficiently all the rakes sanctioned to it, leading very often to idled rail capacity.

"CIL's production is not uniform throughout the year, for example it produces more in the January-to-March and April-to-June periods than in the lean June-to-August monsoon season, which is why more free rakes are available during this time rather than the first half," a CEA official said, commenting on rake availability for coal transport.

In its defense, a CIL official said: "Presently, we are meeting around 98% of the normative coal requirement of the thermal power plants. But the fact remains that our coal production is not going up in sync with the rising generation at these power plants, and linkages are being given to the upcoming power plants at a time when we are unable to scale up our coal output significantly due to long delay in environmental clearances."

The public sector company said that it would be able to add fresh coal capacity of just 20 million tons by the end of the 11th plan duration, due to the obstacles in project clearances and "other constraints."

As such, CIL has suggested that CEA accord priority in allocating the coal quantity contracted yearly to the units which were set up last year.

On average, CIL produces 450 million tons of thermal coal annually. In the last fiscal ended March 31, 2010, CIL produced nearly 460 million tons of thermal coal, up from 438 million tons the year before and set to breach 500 million tons in the next fiscal year, which ends March 31, 2011. India imports some 30 million tons of thermal coal annually.

Meanwhile, CEA has scaled down plans for additional power generation capacity by the end of this fiscal year to 62,488 MW, as against the earlier target of 78,700 MW.

As of February 28, 2010, the country's total installed power generation capacity was 157,229 MW.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.