Imported coal blending to benefit NTPC, other big players

The government's plan to pool imported coal in the event of the Supreme Court cancelling all coal block allocations might make smaller units suffer, while large players such as NTPC could benefit from it.

"NTPC is already blending imported coal with domestically-procured coal. So, if the government pools imported coal to make up for the domestic scarcity, it will benefit us. Hopefully, the pooled price offered by the government would be lower than our current pooled price," said an NTPC official.

Blending requirement

State-owned NTPC, the largest thermal power producer in the country, currently blends 8-10 per cent of the requirement with imported coal. According to officials, for every 10 per cent of imported coal, the cost of power generation goes up by 30 paise a unit.

According to the Cabinet note floated by the power ministry, the power generation cost after pooling of coal would increase by 74 paise a unit in FY15, 44 paise a unit in FY16, and five paise a unit in FY17.

Small thermal power units, which are 100 per cent dependent on domestic coal, are likely to bear the brunt of costly pooled cool. "Units like that of NTPC buy in bulk, for which a price difference of 10-20 paise per unit doesn't trickle down heavily on the final consumer price of power... Small units would face increase in fuel cost," said the official cited above.

Officials at the coal ministry said that in the current scenario, pooling is the only option available. "With cancellation of coal blocks looming over, blending of imported coal seems to be the way out," said an official in the ministry.

The quantum of blending is yet to be decided, with all eyes on the Supreme Court's last hearing on the matter of coal block allocation next Tuesday.

Coal India (CIL) refused to comment on the likelihood of the company importing more coal, until a final order comes from the Supreme Court. CIL and its subsidiaries accounted for 462.53 million tonnes during 2013-14. The amount of imported coal during the same period was 154.55 million tonnes. As of April 2014, CIL and its subsidiaries had issued 177 letters of assurance (LoAs) for power projects to be commissioned during the 11th and the 12th five-year Plans. These LoAs cover a capacity of 108,000 Mw.

Cancellation

Attorney General Mukul Rohatgi had told the Supreme Court on Monday that the government would want at least 40 operational and six ready-to-produce coal blocks to be exempted from cancellation. The coal blocks of NTPC, Damodar Valley Corporation, Jindal Steel & Power, Hindalco, Jaiprakash Power, Sasan Power and Prism Cement, etc are among those which the government has requested not to be cancelled as it would have huge financial implications. According to experts, the loss could be about Rs 88,000 crore.

On August 25, the Supreme Court had declared 194 coal block allotted in the past two decades as illegal.