Hopper cars laden with coal trail behind an eastbound freight train heading through Kentucky, U.S. (Photographer: Luke Sharrett/Bloomberg)

India Asks Private Power Plants To Import Coal To Tackle Crunch

India asked private power producers that don’t have long-term fuel supply pacts to import coal as its shortage could worsen in August-end, a senior government official told BloombergQuint requesting anonymity.

Private generation companies without coal linkages have to review requirements and see if they need to import, the official said. Wind and hydro power generation would fall at the end of August and increase demand from coal-fired plants, according to the official.

Lack of fuel is one of the reasons for the stress in the power sector, where the government has identified 34 plants with an estimated debt of Rs 1.8 lakh crore at risk. Coal Minister Piyush Goyal, however, in a written reply to Parliament had said there was no fuel shortage in India, according to a July 18 report by newswire PTI.

Coal India Ltd., which accounts for 80 percent of the fuel output in India, missed the June output target by 14 percent, according to its exchange filing. For the quarter ended June, it fell about 9 percent short.

Imports rose during the period. India’s top 12 major ports reported a 19.32 percent rise in inbound shipments of thermal coal at 28.28 million tonnes in April-June, PTI had reported citing the latest report from Indian Ports Association.

Plants are getting only 75 percent of the contracted supply from Coal India, Ashok Khurana, director general of the Association of Power Producers, told BloombergQuint in a text message. Power producers, he said, have no option but to fall back on e-auctions or imported coal to meet obligations under power purchase agreements.

Emailed queries to coal and power ministries remained unanswered.

Costlier Coal

The government has asked private generation companies to import coal when prices of the fuel have shot up. That could push up power tariffs.

Most of the coal is imported from Indonesia. The price of the low-calorific value coal—4,200 kilocalories/kg grade—largely imported from the southeast Asian nation is estimated around $54 a tonne for July, according to Girish Kadam, vice president and sector head (corporate ratings) at ICRA Ltd. The price has jumped 20-22 percent in a year, he said.

Capacity without coal linkage or fuel supply agreement in India is estimated to be in the range of 15-20 gigawatts, Kadam told BloombergQuint over the phone. With higher dependence on imported coal, the cost of power for distribution utilities will rise.

At the current price of imported coal, the variable cost of power generation for a coastal plant is estimated at Rs 3 a unit compared with Rs 2.4 a year ago. Using the fuel-cost adjustment route, Kadam said timely pass-through of higher fuel costs to retail users will be crucial.