Uncertain coal supply from mines in the country and problems in importing fuel could lead to massive shortageS for Indian power plants and result in 25,000 MW worth about Rs.100,000 crore being locked up, according to a report by FICCI.
"The issue of adequate coal linkage to power projects has assumed critical importance as nearly 25,000 MW of thermal power capacity is presently stranded. This implies a locking up of Rs.100,000 crore in stalled power projects," said a report by the Federation of Indian Chambers of Commerce and Industry (FICCI) and business advisory firm ICF International.
Capacity addition in India’s electricity sector in the 12th Plan (2012-17) runs the risk of getting derailed due to uncertain domestic availability and volatile international process of coal imports unless immediate reforms are undertaken to augment domestic coal supply, it added.
Coal mining faces many challenges including problems of land acquisition, getting environmental clearances. Also there exist transportation bottlenecks in evacuation of coal from mining areas, some of which are in Maoist zones.
The shortage in domestic coal production has led to a sharp increase in imported coal. From a mere 43 million tonnes per annum (MTPA) at the end of the 10th plan, coal imports are expected to touch about 100 MTPA by the end of 2012.
Indian coal demand has also pushed up prices in international markets. as a result of which some exporting countries have changed rules regarding overseas sales of the precious commodity, further tightening supplies.
"Unless fuel sector reforms keep pace with power sector reforms, India's growth story could be jeopardized. The coal sector needs to provide an environment conducive to private sector participation which can possibly bring new technology and increase process efficiency," said Rajiv Kumar, secretary general, FICCI.
"In the long run, however, India needs to increase the share of its renewable energy portfolio in its energy basket," he added.
The FICCI-ICF report suggests a three-pronged approach to fast track augmentation of coal supplies:
-- allowing captive mines to sell surplus coal at market prices (e-auction, linkage to imported coal, domestic bidding) which will incentivize additional production.
-- allowing commercial mining at market prices which Coal India (CIL) can offtake and supply in the domestic market.
-- full-scale commercial mining at market prices through amendment in the MMRD Act.
The adoption of latest technology and mining methods has been slow, leading to low productivity. These issues need to be holistically looked at by all concerned agencies including CIL, said the FICCI report.
FICCI also said the power sector would find it difficult to make up the shortage of coal by switching to gas owing to high price of liquid natural gas. While domestic output of gas is set to rise, there are no long term projections about its availability beyond 2016.
"Limited interest has been observed in the recent NELP rounds primarily because of the gas pricing issue and the gas utilization policy. This has led to uncertainty in the development of gas based generation capacity in the 12th Five Year Plan," said the report.