UP agrees to import coal; state govt to bear cost of Rs 895 crore

It may be mentioned that the Union power ministry, had in December, asked all utilities in the country to import 4% of their coal requirement for blending.

UP agrees to import coal; state govt to bear cost of Rs 895 crore
As per calculations at that time, a 10% blending was expected to cost an additional Rs 11,000 crore.

In a climb-down from its earlier stance, the Uttar Pradesh government on Tuesday decided to allow coal imports for blending with domestic coal for power plants in the state. The state cabinet approved the coal imports through by circulation, though it has tweaked the Centre’s directive of 10% blending for the entire year and instead allowed 4% blending for just two months – August and September 2022.

The UP government has been resisting the Centre’s directive to import coal, citing high costs.   

Talking to FE, additional chief secretary, power, Awanish Kumar Awasthi said that the cabinet has approved import of a total of 5.46 lakh metric tonne of coal for the months of August and September through Coal India for both state generators as well as for IPPs. It has also decided that the additional cost of Rs 895 crore involved in the import would be borne by the state government. The state cabinet approved the proposal which was earlier cleared by the energy task force (ETF), headed by the chief secretary.

According to Awasthi, the pressure to import coal was felt as the Centre had reduced the state’s domestic coal supply by almost 30%. “It was important to import coal so as to restore our domestic coal supply,” he said.

The ETF had concurred that due to acute shortage of coal stock at all the state’s thermal power plants and “unreliability” of power availability at exchanges, it is reasonable to import coal in order to offset the shortage in domestic supply.

According to sources in the power sector, the ETF has worked out that while state generating stations would require a total of 48 lakh metric tonne coal during these two months, IPPs would require 88.52 lakh metric tonne, taking the total coal requirement to 136.52 lakh metric tonne. At 4% blending rate, the requirement for imported coal would be to the tune of 5.46 lakh metric tonne, entailing a cost of Rs 895 crore.

According to sources, the state would follow the Centre’s guidelines and submit indents to CIL for importing coal through the competitive bidding route.

It may be mentioned that the state government had earlier in May decided not to import coal for power generation, despite a Centre’s directive that both state-sector and private gencos must import fuel for 10% blending and had cited the high cost of imported coal as a major deterrent.

As per calculations at that time, a 10% blending was expected to cost an additional Rs 11,000 crore, which would either have to be passed on to the consumers or had to be borne by the state exchequer.

Uttar Pradesh Power Corporation (UPPCL), the umbrella body of the power sector in the state, had in fact, issued a blanket order, directing all IPPs in the state – Reliance Power, Bajaj Hindusthan, Lanco, and Prayagraj (Tata Power) – to not import coal and had even asked them to cancel tenders.

It may be mentioned that the Union power ministry, had in December, asked all utilities in the country to import 4% of their coal requirement for blending. Later in April, it directed 10% of the gencos’ total requirement for blending with domestic coal. The Centre followed up the directive with a warning that if the gencos do not import 10% of coal for blending by June 15 — they would be penalised and their domestic coal supply would be cut.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Photos