KOLKATA (miningweekly.com) - In light of a shortage of thermal coal in the country, the Indian government is looking at a proposal to give priority, in fuel linkages, to standalone utility power plants over captive power plants operated by various industries.

According to a proposal framed by the Power Ministry, only captive power plants that were operational by 2015 should be considered for coal fuel linkage allocations, while those beyond the cutoff year would need to depend on imported feedstock.

Based on projections of thermal coal availability from domestic sources, the Power Ministry believes that limiting access to the fuel for captive power plants would ease supply pressures to independent power plants. It was thought that captive power plants were better placed to absorb the higher cost of imported coal than standalone power plants, which faced hurdles in passing on the costs through hikes in tariffs to consumers of electricity.

In a submission to an inter-Ministerial group on coal allocations, the Ministry sought a physical count of all captive power plants scheduled for construction between 2012 and 2017, and saw fit to advise that coal linkages be extended only to plants that have already applied for fuel linkages and are slated for commissioning by 2015.

According to the Ministry, an estimated 13 000 MW of captive power generating capacity was slated for construction by various industries, and the proposal to restrict thermal coal linkages as per the government’s criteria would leave about 5 000 MW of capacity without domestic coal supplies.

Projections from the Planning Commission showed that total coal demand by 2017 would be around 842-million tonnes, while Coal India Limited, which accounted for over 80% of domestic supplies, would not be able to produce more than 653-million tonnes.

However, according to an official in the National Aluminium Company Limited, the country’s largest aluminium producer, which operated a 960 MW captive power plant and was partly dependent on imported coal, said that restricting fuel linkages to new power plants would leave power-intensive industries like smelting, in the lurch.

The timing of the consideration of such a policy was detrimental, amid uncertainties over how strictly the Indonesia government would be in its imposition of its policy of restricting exports of minerals in favor of domestic value addition.

As it stands, Indonesian suppliers, which account for about 20% of Indian coal imports, were resisting Indian consumers seeking long-term contracts and instead preferring offers in the spot market, the official said.

According to Commerce Ministry data, India imported 7.9-million tonnes of coal for the steel and cement industries and 32.8-million tonnes for thermal power plants during first quarter of 2013/14.