Coal Shoal

Almost 65% of the country’s total power generated comes from burning coal. If we consider the importance of supply of reliable power in the development and growth of not just the industrial sector but all those sectors which significantly and directly contribute to the country’s growth, 65% is a magnanimous share. Yet, it seems ridiculous that in the country which boasts of the 3^rd highest production of coal in the world, every month a good 20-30 coal based thermal power plants (TPPs) face sub-critical coal stocks. A good share of the total coal consumed comes from countries which have way smaller reserves of coal than India. Surely, those countries are doing some things right that we are not. The problem has its roots spread deep and it is indeed high time that steps be taken to iron out the irregularities.

Going exactly one year back in time, the railways budget, like all other years proved to be a no show for Coal India Limited (CIL). Instead of improving the core business activities, the focus was on the revenue from non-core activities. Apparently, the construction of railway museum, and a number of similar ‘non-core’ activities were allocated funds which in my opinion at least, could have been spent well elsewhere. The freight loading was targeted at 944 million tonnes (MT) for the previous year and 952 MT was achieved. This gave them a reason to rejoice. Alas, even an extra 8 MT that was achieved could not have sufficed the coal shortage even if all of it was taken by coal. This, to my surprise, did not come as a shock to most of the coal industry insiders as they have been habituated to the royal snub by the railway ministry for quite some time. This year’s budget was no different.

No sir, I am not going off on a tangent. To some, the commentary above (of interlinking coal supply to railways budget) would sound like comparing chalk and cheese and some time ago it would have to me too; but that was before I read an article which cleared some of my misgivings. The article said that in 2009-10, the domestic coal demand by the TPPs alone was pegged at 404 MT. CIL could only suffice about 313 MT of it and if we include the supply from captive coal mines, not more than 364 MT could be delivered. This amounts to more than 10% shortage. What the article said further was what took me quite some effort to swallow. CIL had a stockpile of 54 MT which was undelivered. Losses due to theft and spillage aren’t even significant in comparison. According to CIL, they require around 200-220 wagons per day to evacuate their daily production but only about 170 per day are made available to them. Coal is perishable and cannot be stored for a long time. So, CIL has signed an agreement with NTPC to set up a 2000 MW coal based TPP for themselves which will consume the stockpile at least to an extent if not all of it.

The off-shore coal also has it own issues like uncertainties and delays in offloading which are like a large foot in the door but these are outside the scope of this article. If things within India were right, probably there would be no need for imports. Some may argue that the imported coal is of a much better quality but are we forgetting that it is also that much more expensive? The price of the grade E and F of Indian coal that the TPPs usually use, costs around Rs. 800-900 per tonne. If imported coal was more economical or even uneconomical by a small amount, the tariffs of the off-shore coal based TPPs would not have been twice as much as those of the pit-head plants.

All plants that face sub-critical coal stocks have to run at PLFs way below their economic PLF. No surprises that most of these plants are state owned. SEBs already in huge debt, are probably very feeble and soft targets. As they are not able to produce much, the supply (of electricity) dips. The basics of economics tell us that if the supply decreases, the demand will increase. This should ideally increase the prices but electricity tariffs are not so flexible and if it is to do with tariffs of plants run by SEBs, well, lesser said the better. This only aids in piling up of already huge losses of most of the SEBs. The losses reported by all SEBs combined together is equal to a sizable portion of the GDP of the country.

There are many more problems which mar the delivery of adequate coal to the right place and yet many which arise out of the inadequate supply, but first things first. CIL is often made to look like the culprit in the dungeon but it may not really be the case.

Which problem out of so many in the system in place today is dealt with first is probably a matter of opinion and so is the way to tackle those problems. The Government which has been trying to distance itself from the sector gradually over the years have to take some concrete steps in solving some core issues. Maybe the sector is not so mature yet to allow it to develop on its own. We can only hope that the Government doesn’t leave the sector groping in the dark.