No coal shortage. Think out-of-box, says NTPC chief

India faces a power deficit of 10.3%, but producers are not 

excited about generating more because of rising costs. NTPC chairman, Arup Roy Chowdhury says India needs to subsidise the cost of fuel for power plants on the lines of petroleum products, because the availability and cost of power will determine the country’s growth in the Twelfth Five-Year Plan. Excerpts from an interview with DNA:

Coal shortage is the biggest impediment for power generators. How do you see this affecting the sector — and that includes you?

I want to ask a counter-question: Is the country facing coal shortage? There is none. The government has to find a way so that Coal India Ltd is able to meet the requirement of the country. After all, if there is a requirement of power and the only reliable fuel available in the country is coal, then it should be Coal India’s responsibility to ensure that it meets the requirement to match a GDP growth of 8-9%. And if it is not able to mine coal in the country, then it should import and sell to us at a pooled price.

So you support the idea of pool pricing? Will that not increase the cost of power?

Why not? What are we doing with petroleum products? Aren’t we doing something similar?

Just like that, somebody has to take a call on the pricing of coal as well. We as a country have taken a call that diesel is something that we have to subsidise as it has a cascading effect on prices. If we take a call that power is something that has a similar kind of effect, then we need to find out what should be the reasonable cost of power. And have a policy accordingly.

You have been trying to secure coal mines abroad but we haven’t seen deals yet. Isn’t there a need for NTPC to be more aggressive on this score? Why do I need to procure mines abroad? 

I need to do so only if there is a shortage of coal. As of today, I am importing 12 million tonne (mt) through the MMTC and SSTC route, and 4 mt more on my own. That 16 mt is more than enough for me. Remember, it is not just shortage of coal, it is also the tariff. It is very easy to say that we will design our boiler to take imported coal, but who is going to buy that (higher-priced) power? An acquisition of a mine makes sense if I need to blend more than 10% of imported coal at power plants and I have a buyer at an increased tariff. We haven’t kept our eyes closed, we are looking at it. ICVL (International Coal Ventures Ltd) is also looking at it, and we are a part of ICVL as well. We are not desperate. If there is something worthwhile comes about, we will definitely go for it.

How much imported coal are you blending now? And what’s been the impact on cost?

We are blending about 10% imported coal at our power plants now, and the price of power has increased by 30 paisa per unit and people are not buying that power.

What is the maximum blending that your boilers can take?

Up to 30% but the cost of power would be very high.

Recently the ministry of power said plants commissioned in 2009-10 may have to run at 40% plant load factor due to shortage of supplies from Coal India. You have 3-4 plants in that category…

We have agreement with Coal India for 85% of our fuel supply needs.

But Coal India has not signed any fuel supply agreement in the past two years and that’s the reason the ministry has pressed the panic button…

This question is hypothetical because we have not got anything in writing from the ministry that it is going to be 40%. Coal India is guaranteeing a certain amount of coal to us under a memorandum of understanding. Plus we are working on our own mines and we are also looking at imported coal so if we import 10% and our own coal is about 20-25%, the rest we can get from Coal India. It is a very dynamic situation. As of today we have no problem from Coal India, they are perfectly meeting our requirements.

You have constantly faced problems over transport of coal to plants. What is being done to overcome this?

Today we have a better understanding with the Indian Railways. The second point is, the Railways has very kindly agreed to assign an officer to us so that we as an organisation understand their logistical constraints. Today, if we have any coal transport problem it is limited to Farakka and Kahalgaon. As regards the Farakka (West Bengal) plant, for the first time it is getting into an incentive zone. We have also linked up with the Inland Water Transport Authority to ferry imported coal. And the Central Electricity Regulatory Authority also allows us to stock a certain percentage of coal. We are trying to increase that stock whenever we can. So we can say the problem of transportation has been almost sorted out.

The decline in natural gas production is a cause of concern for the power sector. What is your Plan B if you don’t get the required amount of gas?

The decline in natural gas production is something I have read only in the newspapers, nothing has been communicated to us directly by the government. We are still optimistic that the empowered group of ministers (EGoM) will issue us gas for our Twelfth Five-Year Plan projects that would be of 7,000 mw capacity. We will review the projects only if the EGoM says it cannot give us any gas.

So will your Plan B would be to import LNG to run your gas-based plants?

I don’t think so. Power produced through LNG would be too expensive, nobody would buy. At one point, we had a plan to set up a unit in Kayamkulam, Kerala. So there is no Plan B at the moment. If there is one, it would be domestic gas.

What is your stand on the North Karanpura plant in Jharkhand?

We have been told to stop our project when everything has been cleared — land acquisition, environment clearance — and the R&R activity has been completed. The Jharkhand government is constructing a dam to supply water to the plant. This is a government decision like the one for Loharinag Pala (in Uttaranchal). Nowhere in the country is mining is done at 300 meters, forget mining at 500 meters. This plant is designed for 25-30 years and I do not see Coal India mining at that level in the next 35 years.

Is the problem of ‘go’ and ‘no-go’ unique to India? Couldn’t this have been sorted out by the use of technology?

If you look at India and other countries, it is very important to understand that cost is an important factor. We can’t say that we are a country where cost does not matter. As I told you, states are not able to absorb even a 30 paisa increase in the cost of power. That is why using new technologies is not viable at the moment. We have to offset the increased cost of producing coal. If we feel we need to have peaking power stations, then we can give costlier coal to peaking power stations. We can have merchant power stations that provide power to bulk customers for whom cost does not matter as much and then the expensive coal can go to those power plants. We can use the costly coal for e-auctioning too; currently normal coal is used. I think we need to think beyond what we are thinking today, it is not difficult to find a solution.

This year you did not find any takers for 13.8 billion units because the price was high. Will one see more power cuts this year because cost is not coming down anytime soon?

This is a prerogative of state electricity board. Power cuts happen not just because of shortage of power. The 13.8 billion units units account for about 1,500 mw. What it means is that much power was available but could not be used because the state utilities were not ready to pay higher price.