CII suggests ways to address coal shortage

Introducing an independent coal regulator and enabling competitive bidding of coal blocks by ushering in a regime of ‘production-linked payments’ as in case of bids under Nelp are among the suggestions floated by the Confederation of Indian Industry (CII) to urgently address the coal shortage being faced by the industry.

The industry body has also proposed creating an enabling environment for private participation in exploration activity, evolving a uniform R&R framework for coal mining projects and building a road map to introduce commercial mining to tackle the shortage that has the potential to stall several infrastructure projects.

As per an assessment of the sector done by CII, the acute shortage of coal in the country has become an issue of major concern for the power sector and has led to apprehensions that the ambitious capacity addition targets of 90 to 100 gw in the upcoming twelfth plan period (2012-17) may not be met.

Coal India (CIL) has scaled down its production targets for 2011-12 to 452 million tonnes from 460.5 million tonnes targeted in year 2010-11. In 2010-11 against the target of 460.5 million tonnes, only 431.32 mt was produced due to delay in getting forest clearances, non-completion of some contracts due to litigations and law and order problems in some areas.

Rail transportation of coal is another bottleneck in the sector with several tonnes of the fuel piled at company’s various mines due to inadequate placement of rakes. For instance, Coal India. got 178 rail rakes as against the requirements of 190 rakes in April this year.

Compounding the issue further, CII said, CIL has also not signed Fuel Supply Agreements and is unable to commit delivery of coal conforming to the sanctioned linkage quantity for the last two years. Consequently, lenders are reluctant to fund new projects which are on the anvil. With the power ministry estimating that about 17,000 mw of new and upcoming projects not likely to start operations and 5,593 mw of plants likely to generate only 42% of their actual output due to fuel shortages, the Indian Power industry is clearly witnessing a crisis. “Power shortages due to lack of Coal may impact the Industry severely unless these issues get addressed,” said Chandrajit Banerjee, Director General, CII.

With a Credit Suisse report projecting the coal deficit in India to increase to 400 million tonnes in FY17, the uncertainty over assured domestic coal supply is likely to persist. “Clearly, the Indian government and the coal and power industries will collectively need to take action, says Anil Sardana, chairman, CII National Committee on Power and MD, Tata Power.”