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Coal India offers assured volumes to fuel-starved captive power plants

26th September 2018

By: Ajoy K Das

Creamer Media Correspondent

     

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KOLKATA (miningweekly.com) – Throwing a lifeline to fuel-starved captive thermal power plants, Coal India Limited (CIL) has offered assured yearly supplies of dry fuel for a period of five years with volumes allocated through e-auctions.

CIL has communicated to captive power plants operated by various industries like steel, cement and aluminium that the miner will make guaranteed supplies of 17.5-million tons a year of coal for the next five years through the e-auction route.

Auction for allocation will begin over the next few days and be completed by October 10.

It has been learnt from the Coal Ministry that assured offers of coal through auction to captive power plants will, over the course of the next few years, replace all existing long-term fuel supply agreements that these captive power plants have signed with CIL.

Officials said that while committed volumes of the dry fuel would eliminate uncertainties of supply under existing fuel supply agreements and defaults in supplies from the mines, allocation of coal through e-auction was also expected to net CIL higher sales realisations than negotiated prices under fuel supply agreements.

Each of the operational wholly-owned subsidiaries of CIL have been directed to contribute specific volumes of coal as per their mining capacities towards the guaranteed offers of 17.5-million tons a year of coal to the captive power plants.

The offers of assured supplies are expected to partially offset the Coal Ministry’s earlier directive to coal miners to give highest priority in supplying fuel to public utility thermal power producers, following which there had been a flurry of complaints by captive power plant operators of acute shortages of fuel and a sharp fall in plant load factor impacting on their production of steel, cement or aluminium producing units.

Captive power plant operators had submitted to the Coal Ministry that over the past few months, total coal supplies to the plants had fallen to 40% less than stipulated in fuel supply agreements with CIL.

Rough estimates provided by thermal power plant operators showed that coal demand by these plants was around 60-million tons a year against which, during 2017/18, the plants received supplies of only 40-million tons.

However, analysts are doubtful the 17.5-million tons a year of coal assured by CIL will be sufficient to meet total demand of captive power plants, considering that coal imports during July 2018 alone have been estimated at 17.7-million tons and are expected to have been higher in August 2018. Data for August is yet to be made public.

 

Edited by Mariaan Webb
Creamer Media Senior Deputy Editor Online

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