CEA supports coalmin move to rationalise fuel linkage

Written by Indronil Roychowdhury | Kolkata | Updated: Aug 20 2014, 07:25am hrs
The government is giving priority to coal linkage rationalisation in the wake of shortage of the fuel in power plants hampering generation, says Central Electricity Authority chairperson Neerja Mathur. The move will change the sourcing point of coal for consumers and address logistical bottlenecks, she adds, pointing out that the aim was to ensure steady coal supply.

This is however a major shift in the CEAs stand. In 2011, it was averse to any such changes because the huge exercise of altering sources would not have a commensurate positive effect on consumers. CEA was of the view that the lower transportation resulting from rationalisation would not seriously mitigate the high coal prices.

The UPA had formed an inter-ministerial task force to carry out the rationalisation, which recommended distance-based linkage. But it overlooked the pricing factor. In fact, prices of coal are not the same in every coal mine; they vary according to grade and quality. Sometimes consumers linked to distant coalfields get coal at a cheaper rate though they may pay more for freight. Coal from a closer field could be costing more to a consumer, while freight could be cheaper.

Take the case of the West Bengal Power Development Corporation, which has a linkage to its closest mines under Eastern Coalfields (ECL). But it is linked to mines that produce A and B grades of coal costing an average R6,000 per tonne at present. WBPDCL doesnt need A and B grades of coal and can do with E and F grades costing around R700-800 per tonne from mines under Mahanadi Coalfields (MCL). The power utility is not lifting coal from ECL, though this has been attracting penalty. But the tariff it gets by no means supports costlier coal purchase.

So CEA on such grounds was averse to such an exercise since CIL could neither change the committed quantity nor could it change prices at which consumers were buying coal. But there were advantages in terms of logistics issues like problems in getting railway rakes and carrying coal by road, which down the line resulted in lower off-takes and stock piling at the pit head, also aggravating the risk of coal mine fires. Above that the issue of environment mitigation was also addressed as carrying coal over a lesser distance would mean limiting the spread of coal dust particles.

Coal minister Piyush Goyal in a written reply informed Parliament that the inter-ministerial task force would review the existing sources and consider feasibility for rationalisation of linkages with a view to reduce transportation cost for power utilities, cement, steel and sponge iron sector. A coal ministry official said the latest task forces recommendation will be implemented only with the consent of the consumer.

CIL so far has received 31 applications for rationalisation, including eight from captive power plants, of which rationalisation has been recommended for seven Sanjay Gandhi and Satpura Thermal Power Plant of Madhya Pra-desh Power Generation Company, Gujarat State Electricity Corp, Panipat and Rajiv Gandhi Thermal Power Station of Haryana Power Generation Company, Mejia and Koderma Thermal Power Stations of Damodar Valley Corp and Santhaldih, Kolaghat, Sagardighi and Bakreshwar Thermal Power Stations of WBPDCL.

The task force suggested allocation reduction from MCL and enhancement from ECL for plants of Tamil Nadu Electricity Board. But the consumer did not agree to it, a ministry official said.