Subhash Narayan Posted online: Tuesday, Aug 27, 2013
New Delhi : The country's largest coal producer, Coal India (CIL), is confident of meeting the August 31 deadline for signing the fuel supply agreement with 78,000 MW of power projects even as apprehensions have been raised over the company's ability to meet the committed level of coal from domestic sources.
Sources said that CIL is sitting comfortably over the issue of coal supplies as it would need to meet fuel needs of only 40,000 MW of capacity under the terms of the new FSA this fiscal (2013-14). The balance 38,000 MW capacity is yet to tie-up supplies under long-term power purchase agreements (PPAs) with beneficiaries, a pre-condition for the coal major to start supply of coal.
According to the terms of the FSA agreed by CIL after a presidential directive last month, it is to provide 80% of annual contracted quantity of coal to 78,000 MW power projects coming up between April 2009 and March 2015, with 65% of this coming from domestic sources in the first two years (2013-14 and 2014-15), rising to 67% in the third year and 75% in the fourth year.
Earlier CIL was directed to sign FSAs of 60,678 MW, which was the projected requirement by the power ministry for 131 power plants commissioned or to be commissioned by March 2015. The increase in capacity, therefore, raised doubts whether CIL would be able to fulfill its commitments.
"We are on course to complete the process of signing the FSA as per the Presidential directive. A capacity of close to 40,000 MW has already been covered under the new agreement and the balance would be completed by the end of the month," CIL chairman and managing director S Narsing Rao said.
He said that the company has also offered to supply coal on a non-binding basis for 4,660 MW of capacity that are not on the list of projects to be covered under new FSA but are ready or nearing completion and would need coal supplies to start immediately.
While Rao did not elaborate on how the company was confident on meeting the coal supplies for an expanded list of power projects, sources in the coal ministry said that this was due to the realisation that several power projects are yet to sign PPAs and may need more time to complete the process.
The domestic coal requirement for 78,000 MW works out to about 182 mt. While CIL is expected to provide 379 mt of coal for the power sector in 2013-14 (on a total production of around 494 mt), it would leave only about 104 mt for the new projects and the balance will have to be met through imports.
But with reduced capacity of 40,000 MW projected now, CIL may need just about 90 mt to meet its commitment under the terms of the Presidential directive. It is therefore also willing to support additional power capacity under a non-binding annual MoU even if the projects were not originally identified to be covered under the new FSA.
Till July 25, 2013, CIL has signed 82 FSAs of 34,793 MW capacity. Besides, FSAs in six-cases of 4,430 MW capacity with NTPC and cases of joint ventures of NTPC are under process of signing. Some more FSAs are likely to be signed soon as five cases of state sector and 11 cases of private sector have already achieved the requisite milestones for conversion of LoA into FSAs. Seven cases are awaiting declaration of commercial operation date by Central Electricity Authority while in five cases milestones are under verification before finalisation of FSAs.
Some of the companies that would be signing FSAs with CIL in coming days include GMR, GVK, Athena Power, Adani Power, SKS Power and DB Power.
Earlier, an internal estimates of the coal ministry and the company showed that if all the needs of 78,000 MW of power projects have to be supplied under the terms of FSA, the supply of domestic coal could fall to 56% in 2013-14, 58% in 2014-15 and 63% in 2015-16 — lower than the agreed quantity of 65%.
CIL needed to import close to 78 mt of coal to meet its commitment of 80% coal to power projects. With average landed cost of coal from Indonesia working out to be around R4,500 per tonne, the import bill for this coal could be in excess of R35,000 crore.
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