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A push to increase coal production by cutting through red tape could lighten India’s power burden

comment Updated: Sep 10, 2014 23:38 IST
Hindustan Times

A serious power crisis is certain to envelop the country if the government does not sort out the issues concerning coal supply to power plants even as the Supreme Court has reserved its verdict on the coal blocks whose allocation it had called illegal. The Central Electricity Authority, which monitors about 100 power plants in the country, recently said 27 of those had less than four days’ stock left. On its part, the government has done a sensible thing by requesting the Supreme Court not to cancel the allocation of 46 blocks that have started production or are about to do so. While this may help to tide over some difficulties of the moment, there is a huge uncertainty looming if any cancellation takes place, considering the fact that power is a commodity that is perpetually in deficit. Things can be set right through re-bidding but that will take time and will not leave any scope for compensating the companies that have invested in developing the blocks they had been allocated, adding to the problems of a sector that is highly debt-laden.

Imports are not the easy way out for various reasons. First, imported coal is expensive and pushes up the cost of generating power by about 75 paise per unit.

This had been amply revealed by the fact that Coal India Ltd (CIL), which accounts for 80% of coal output in the country, is in the process of importing a million tonnes of coal and yet has been able to draw up supply agreements for just over 80,000 tonnes. Second, very often coal projects undertaken by Indian companies abroad are running into rough weather, such as the Tata group pulling out of one in Indonesia. The Adanis’ Carmichael project in Queensland, though it has received the Australian government’s approval, is facing opposition from environmentalists. The luxury of blending imported coal with the domestic variety is not available for smaller power generators.

In a meeting with private power producers recently, Piyush Goyal, who is in charge of both the power and coal ministries, assured them that he would sort out the coal problem. In fact, the idea of giving a single minister these two portfolios was to bring about synergy between the two. Mr Goyal should ensure that the CIL, which has agreed to meet 65% of the coal requirements of new plants and 90% of the old ones, meets its commitment. The government should also fast track environmental clearances for many coal and power projects that have been stuck on this account for long. A full-scale transition to gas-based power generation still seems some way off because of lack of clarity on gas pricing.

First Published: Sep 10, 2014 23:35 IST