India is facing a chronic power shortage as electricity demand continues to outpace supply. The Union power ministry is trying to accelerate the pace of capacity addition. However, its efforts are unlikely to go far enough because some of the critical policies of concerned ministries like coal still remain out of sync with the country?s goal in power generation capacity addition.
For example, the government is allocating captive coal blocks in a bid to attract enhanced investment in power generation. However, developers are required to secure mandatory clearances for undertaking mining work in the allocated block on their own. Under the coal ministry?s existing guidelines, in case the mining project is denied clearance, the developer cannot be allocated an alternative block.
Meanwhile, it turns out that public sector coal companies like Coal India Ltd (CIL) do not always check on the feasibility of mining for captive blocks allocated to power project developers. That means the developer has to take the chance. A case in point is allocation of Lohara West and Lohara extension captive blocks for Adani Power Ltd?s Tiroda mega power project in Maharashtra. The developer failed to secure environmental clearance for undertaking mining work because the area falls under the proposed buffer zone of the Tadoba-Andheri Tiger Reserve.
The developer has already committed to supply 2,520 mw power from the envisaged 3,300-mw project to Maharashtra State Electricity Distribution Company Ltd (MSEDCL) at a fixed tariff. Cost of coal supply from a captive mine is much less compared to its alternative sources. Moreover, the developer has certainty about fuel cost for the project. Perhaps, it was because of the assurance on the coal cost that the developer agreed to supply such a big quantum of power to MSEDCL at a pre-determined tariff.
But now, the developer will have to look for alternative sources of coal. In case the price of coal goes up, the cost economics of the project would be impacted. In that eventuality, the developer might be forced to increase tariff for the project. Ultimately, it is electricity consumers in Maharashtra who would have to pay the price for the coal ministry?s flawed policy.
The project is included in the Union power ministry?s 11th Plan capacity addition programme. So, the delay in tying up fresh coal linkage could lead to the removal of the project from the current Plan, impacting the national capacity addition programme.
The power ministry and utilities have been facing flak for failing to meet capacity addition targets in successive Five Year Plans. To deflect the growing criticism, they tend to put the blame on the public sector power equipment supplier Bhel. However, not much attention is paid to policy bottlenecks that are taking their toll on the national capacity addition programme.
Numerous initiatives have been taken in recent years to improve coordination among concerned ministries so that the pace of capacity addition can be accelerated. But the fact that the coal ministry hardly ever does any feasibility study before allocating captive coal blocks shows that not much has changed on the ground.
The concerned ministries need to coordinate their policy response to meet the challenge of capacity addition if the risk of power shortage derailing the country?s economic growth is to be neutralised.