India Set to be Third-Largest Energy Consumer as Coal Feed Standoff Cramps Power Generation

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Reducing India's dependency on coal as a fuel feed for power generation was a major theme in remarks made by power minister Sushilkumar Shinde as he forecast that the country would be the world's third-largest energy consumer, after the U.S and China, by 2020. To achieve an annual economic growth rate of 9%, energy supplies should increase 6.5% annually, he said.

Shinde said that a two-pronged strategy had been adopted to meet the rise in energy demand. This would be to augment domestic supply sources, including renewable energy, in addition to focusing on demand-side management and energy-efficiency measures.

Domestic capacities for building power plants with supercritical and ultra-supercritical technology are also being developed to reduce coal dependency. International power companies are developing supercritical power equipment manufacturing plants in India with local partners, Shinde said.

As he made these observations, the minister must have been acutely aware of the standoff taking place between the power generation sector and state-owned Coal India Limited (BSE:533278) (CIL) (Kolkata) over the issue of secure coal feeds for power plants.

Independent power producers (IPPs) and state-owned National Thermal Power Company (BSE:532555) (NTPC) (Delhi), which is the country's largest power operator, have balked at signing a new fuel supply agreement with CIL. They are reported as saying that the proposed contract is biased and absolves the state-run company of all obligations. This follows a presidential directive to speedily put a secure supply agreement in place.

The power sector reacted negatively to the proposed agreement that allows CIL to pay a penalty of only 0.01% of the value of the shortfall if it fails to meet coal supply commitments. The contract also allows the supplier to terminate any agreement unilaterally. Objections also have been raised on a clause that absolves CIL of supply obligations in case of power outages or equipment breakdown, as well as giving CIL the right to decide the cost of imported coal.

At the end of last week (April 19), the Central Electricity Authority reported that 19 power plants across the nation had less than four days of coal stocks, and some in the northern region had less than four days of fuel reserves. Another 30 power stations had less than seven days of stocks.

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