NEW DELHI: Unhappy with the minimum penalty norms in CoalIndia’s fuel supply agreements (FSA), the power ministry has approached the coal ministry to change the disputed clauses.
‘‘We are trying … we are taking up this issue with CoalIndiaand ministry of coal. Disincentives are not there for three years and after three years penalty is only 0.01% … we would want it to be changed,’’ power secretary P Uma Shankar told reporters here.
He said that the ministry is in talks with the coal ministry over the penalty clause in fuel supply agreements and hopes to sign pacts with amended conditions soon.
‘‘We hope to finalise the points and also hope to sign the FSA with the conditions that we want,’’ he said.
CoalIndiahad suggested a 0.01% penalty on not delivering the fuel in time, but the penalty would only be applicable after three years of signing the pact.
NTPC and many other power companies had refused to ink fuel supply pacts with CoalIndia, disagreeing with introduction of some clauses in FSAs.
CoalIndia, which is under the administrative control of coal ministry, has been asked to sign fuel supply agreements (FSAs) with power plants committing a minimum of 80% of fuel supply, failing which it would attract penalty.
According to sources in the power ministry, ‘‘We want to sign the FSA with the earlier clauses.’’
As per the FSA proposed by the power ministry, CoalIndiawould be incentivised for supplying above the 90% level. The percentage of incentive would increase with increase in supply.
The same way, it ( CoalIndia), would be penalised for not meeting the minimum supply target of 80% and
the percentage of penalty would increase with decline in supply.
Meanwhile, CoalIndiahas directed its various subsidiaries to sign the fuel supply pacts with the power producers. CoalIndiahas nine subsidiaries, including Mahanadi Coalfields Ltd and Eastern Coalfields Ltd.
INDIA OFFERS SOPS TO PUSH EXPORTS OF GREEN PRODUCTS
NEW DELHI:Indiahas offered key incentives to exporters to tap the growing demand for clean energy equipment and non-polluting electric vehicles in overseas market, which would help it overcome the rising trade deficit.
The commerce ministry has identified a total of 16 green products including solar power equipment for export promotion after a mid-term review of its 2009-14 foreign trade policy. The list also includes equipment like windmills, bio-mass gassifier, waste boiler as well as electric vehicles. The ministry has reduced export obligation for manufacturing of these products to 75% under EPCG (Export Promotion Capital Goods) Scheme.
This comes at a time when the Indian manufacturers of clean energy equipment are sensing opportunities for themselves in the export market as several countries in Latin America andAfricago for big capacity addition in clean energy. Meanwhile, Chinese solar equipment suppliers have been shut out of the lucrativeUSmarket owing to imposition of anti-dumping duty. Significantly, Indian clean energy equipment suppliers have been eying the export for a while. But they have been unable to make much of a dent in the absence of trade incentives. Tough Chinese competition made their task even more difficult.
“Markets are opening up in Latin America andAfrica. We can access these markets,” said Prashanth Sakhamuri, chairman, HHV Solar Technology, a Bangalore-based solar equipment manufacturer.
Indiahas envisaged to add 20,000 mw capacity under the Jawaharlal Nehru National Solar Mission. To meet equipment requirement for the envisaged capacity addition, it has favoured development of a domestic manufacturing capacity rather than rely on imports.
Indiahas a well-established industry for windmills. A large domestic market has contributed to the emergence of a globally competitive Indian wind turbine industry.
Manufacturers like Suzlon are key players in the overseas market. NowIndiawants to replicate wind equipment success in other renewable energy segments.
RAISE PENALTY IN FUEL SUPPLY PACTS, POWER MINISTRY TELLS COAL INDIA
NEW DELHI: The Power Ministry wants CoalIndiato increase the penalty mentioned in the latest fuel supply agreements, said the Power Secretary, Mr P. Uma Shankar.
“We want to change the minimum penalty clause (0.01 per cent). We are in talks with Coal Ministry and CoalIndia. Penalty should be as such that it will work as a disincentive for non-performance. Power companies also feel that 0.01 per cent penalty in fuel supply pacts will not prove to be a deterrent,” Mr Shankar added.
Till now, 15 fuel supply pacts have been sealed between CoalIndiaand power producers that include Rajasthan Rajya Vidyut Utpadan Nigam, Bajaj Hindustan, Lanco, Reliance Power and Adani Power.
A senior CoalIndiaofficial told Business Line on Tuesday that the miner is ready to sign FSAs with all projects that would be commissioned till March 2015, and have power purchase agreements with State distribution utilities.
POWER EXCHANGES PURSUE NPEX FOR PARTNERSHIPS
NEW DELHI: The existing power exchanges are pursuing the National Power Exchange Ltd (NPEX) to carry out business jointly.
Sources privy to the development said that NPEX has got feelers from the Indian Energy Exchange (IEX) and Power Exchange India Ltd (PXIL) to come in as a partner.
“The power trading market in the country is very shallow at present. NPEX is exploring whether there is room for a third exchange in the country or to do business jointly,” sources added.
NPEX is a joint venture promoted by NTPC, NHPC, Power Finance Corporation and Tata Consultancy Services to undertake the business of setting up and operating a national-level power exchange. Its other equity partners are Bombay Stock Exchange, IFCI, Meenakshi Power and DPSC.
Mr Arup Roy Choudhury, Chairman and Managing Director, NTPC, said, “We are reviewing if there is scope for the survival of another exchange in the country.”
NPEX has already got the final nod from the Central Electricity Regulatory Commission (CERC). Sources said the time taken (almost three years since its inception) to reach this stage has been mainly because NPEX has been treading cautiously, learning from the experience of the existing two exchanges.
CERC market regulation stipulates that inIndia, technically, five exchanges can co-exist. Besides, the CERC regulations stipulate that if any exchange is unable to garner 20 per cent of market share within two years of its operations, then either it closes down or can be merged with the more successful one, provided three exchanges are in operation.
Today, power purchase from exchanges accounts for about less than 2 per cent of the total consumption. The project involves an investment of about Rs 50 crore.
The Central and State Electricity Regulatory Commissions have powers to grant inter-State and intra-State trading licenses. According to CERC, there are 40 inter-State trading licensees as on March 31, 2011. Current participants in power trading business include PTC, NVVN, Tata Power Trading Company, and GMR Energy among others.
POWER DEMAND IN CESC AREA JUMPS 11 PER CENT IN A MONTH
KOLKATA: The power demand in the CESC distribution area has jumped by 11 per cent in just 30 days due to soaring temperature. “The demand for power has crossed 1900 MW mark from 1700 MW a month ago,” a CESC spokesperson said. CESC officials said that in a single month, an estimated 40,000 air-conditioners have been sold in the distribution area and this is one of the major reasons why there was a sudden rise in the demand for electricity.
CESC officials said generation was over 100 per cent of their capacity and touched 1,241 MW compared to installed capcity of 1225 MW.
CESC was able to meet the demand, but was grappling to maintain steady supply of electricity without tripping.
CESC area manager (south) Kanak Dutta said he was receiving several complains of low voltage in certain pockets of his area.
“We are trying to install new transformers but getting a piece of land remains to be a challenge and without them there is very little we can do to maintain proper voltage,” he said. CESC executive director Dilip Sen said unauthorised installation of air-conditioners was key culprit for low voltage. “Last year, we had installed 350 transformers and this year we may have to increase the number,” he said. To meet the sudden leap in power demand for the city, the state utility was supplying nearly 750 MW against normal supply 450-500 MW to CESC. This has resulted in power cuts in the rural parts ofBengalwhen temprature had turned unbearable to around 45 degrees Celcius.
However, the West Bengal Power Distribution Company has maintained that there was no power cut.
ADANI POWER ENTERS FUEL PACT WITH CIL FOR MUNDRA PLANT
KOLKATA: Private sector power major Adani Power Ltd on Monday entered the fuel supply pact with CoalIndiafor Mundra plant inGujarat.
The 4,620-MW coal-based thermal power project is primarily linked to overseas and domestic captive sources. Mundra facility was fully commissioned in February.
While details of the FSA are not available, CIL sources confirmed that the private major has entered agreement. Comments were not available from Adani Power.
With this almost all the private sector majors have entered FSA with CIL for projects commissioned between April 2009 and December last year.
Other private operators who entered the pact so far are: Kolkata-headquartered CESC Ltd; Reliance Power-controlled Uttar Pradesh-based Rosa Power; Lanco and the UP-based Bajaj Energy for a combined capacity of 2,530 MW.
The total number of supply pacts signed stands at 15 out of 48 identified projects.
While a couple of state utilities have also entered the pact, the Union Government-controlled NTPC Ltd is yet to join the bandwagon.
The public sector major has demanded roll back of the existing draft, cleared by CIL board.
GREEN TRIBUNAL GIVES CHETTINAD POWER SIX MONTHS TO SET RIGHT EIA REPORT
CHENNAI: The National Green Tribunal has given six months time to Chettinad Power Corporation Ltd to update its Environment Impact Assessment report relating to its 1,200 MW thermal power plant in Tamil Nadu.
In a direction on May 30 on a petition by an NGO, Coastal Action Network, and others including members of the fishermen community in Nagapattinam District where the power plant is to come up, the Tribunal said that the final EIA report on terrestrial and marine ecology has to be updated in line with its directions to the Ministry of Environment and Forests, Government of India.
It has directed the Ministry to evolve a strict mechanism to check that the Terms of Reference for the EIA studies are fully followed in the draft EIA before it is made public ahead of conducting a public hearing.
The final report should be evaluated based on the Terms of Reference, the draft EIA, and suggestions made in the public hearing before it is placed before the Expert Appraisal Committee for Environmental Clearance.
The directions follow the petition against the clearance for the power project by the Environment Ministry. The Tribunal considered whether the public hearing relating to the Environment Impact Assessment was conducted in line with the procedures; whether there was any inconsistency in the draft and final versions of the impact assessment report which pose a threat to environment and ecology; and whether the Committee had made a mistake in giving the project environmental clearance.
The Tribunal, a statutory body under the Environment Ministry, set up under the National Green Tribunal Act of 2010, said the public hearing conducted on May 21, 2010, “does not suffer from any substantial irregularity.”
The Tribunal was, however, critical in its observation relating to variations in the draft and final versions of the impact assessment report. But it was up to the Ministry to check in detail whether the report is in line with the Terms of Reference. While observing that the discrepancies may not have a substantial impact on the environment and do not call for setting aside the clearance for the project, the Tribunal said the “defects/deficiencies” have to be set right before the start of the project.
The Ministry has to follow the directions of the Tribunal in this regard.
The Green Tribunal has also said the procedures under the Environmental Impact Assessment Notification 2006, have also been complied with.
The entire process has to be completed in six months from the date of the judgement. Pending the final decision of the Ministry, the environmental clearance for the project granted on January 20, 2011, (J-13012/89/2009-IA.II(T) stands suspended.
The Tribunal has also directed the Ministry to commission a cumulative impact assessment study for all the thermal projects in the area within one year and impose additional precautionary measures as needed.
ENVIRONMENT QUALITY IN NCR HAS WORSENED: TERI SURVEY
NEW DELHI: A large number of people residing in the National Capital Region (NCR) feel that the quality of the environment around them has worsened, especially air, water and green cover.
An online survey by The Energy Resources Institute (TERI), on the occasion of the World Environment Day on Tuesday, said a majority of the respondents blamed the attitude of people as the most important reason for littering in public spaces.
Despite the use of Compressed Natural Gas for public transport in the region, 59 per cent respondents under the age of 34 found the air quality to have worsened, whereas more than 47 per cent of those above 35 years believed that air quality had improved.
A positive sign was that there was high awareness about global environmental concerns, such as climate change. “Internet, national newspaper and television are the most important sources of information,” the survey said.
When asked about the way out, roughly 50 per cent respondents said planting trees was the best measure.
GREEN BUSINESS IS KEY TO GROWTH TARGET: ADI GODREJ
HYDERABAD: “IfIndiahas to be a developed country by 2022, it has to become a leader in green business, playing a significant role in the global green economy,” Mr Adi B. Godrej, President of CII, said.
Speaking on the World Environment day at the CII-Godrej Green Business Centre, Mr Godrej said the CII has been working on [email protected] 75 agenda for makingIndiaa modern developed country by 2022. Environment is one of the key focus areas of in this agenda.
The CII is witness to two distinct trends where the Indian industry has realised that the importance of ecological sustainability is important to growth of the country and many industries have taken up initiatives to ensure that growth is not at the cost of environment.
The focus is on reducing energy and water consumption, thereby making the industry competitive. This matches what the management expert Mr Michael porter said, “Going green makes strong business sense.”
With regard to energy efficiency some of the industries in the country, such as steel, cement and aluminium plants have managed to reduce their energy consumption. The Indian cement industry takes pride in having at least 3-5 plants that are more efficient compared to any other part of the world.
The green building movement has gained with Indian having about 1650 registered green buildings with a projected coverage of 1.16 billion sq.ft., second highest after theUS.
The built up space would rise from the present level of 20 billion sq.ft to 100 billion sq.ft in next 20 years. That means that 80 per cent of the building stock inIndiais yet to be built. This offers unique opportunity to do it green by design.
GOVERNMENT LOOKS AT AUCTIONING COAL MINES TO NEW POWER PLANTS
NEW DELHI: The government is looking at the possibility of allocating coal mines, which have been earmarked for the power sector in the upcoming auction of 54 mines, to new power plants only.
“Coal blocks for power generation would be only for the new power plants,” says an official document highlighting the details of a meeting of the Coal Ministry held with representatives of the state governments.
Of the 54 coal blocks identified by the government a couple of days back, a maximum of 16 have been earmarked for the power sector and 12 for PSUs, among others.
The Coal Ministry also said that the state government will have to apply for the blocks earmarked for the power sector for which tariff-based bidding will have to be carried out for award of the power project, the document said.
The meeting held to discuss the draft terms and conditions for allocation of coal blocks to PSUs was also attended by Additional secretary Zohra Chatterji, CMD of Central Mine Planning & Design Institute Limited (CMPDIL) A K Singh among others.
The government had earlier said coal mines earmarked for the power sector are meant for both tariff-based bidding and central government companies engaged in production of power. The further earmarking would be done in consultation with the Ministry of Power and CMPDIL, it had said.
The government had also earmarked 12 blocks for the steel sector, seven for the cement sector, five for sponge iron and two for surface gasification, in the forthcoming allocation of coal blocks.
Earlier, Coal Minister Sriprakash Jaiswal had said the government was ready with the list of coal blocks to be put on auction and the process will begin by June.
The gap in the demand and supply of coal widened to 161.5 MT last fiscal. In 2010-11, the shortfall of coal was about 132.8 MT, while in 2009-10 it was 90.5 MT, according to an official document.
SRIPRAKASH JAISWAL DUBS COAL AUCTION ANTI-PEOPLE
NEW DELHI: It’s the interest of the common man that was at the core of the UPA government’s policy on allocation of coal blocks, Union coal minister Sriprakash Jaiswal insisted on Tuesday, and termed the auction or bidding alternative as anti-poor and anti-consumer.
A day after party leaders at the Congress Working Committee meeting urged ministers to defend the government’s economic policies and decisions rather than being apologetic about them, Jaiswal tore into the Opposition’s charge that allocating coal blocks instead of auctioning them had cost a massive loss to the state exchequer.
The minister said the government’s policy had always been dictated by affordability of electricity to the common man.
‘If we have the coal and cannot use it, then what¿s the point in having it’? Coal Minister Sriprakash Jaiswal
If bidding was allowed, it would promote commercial mining and would lead to a situation where power companies would ultimately end up selling electricity at exorbitant rates, he said.
‘That is the reason we forced every private player to sign a PPP (public-private-partnership) and that is why they are selling electricity at regulatory rates, which is consumer friendly,’ Jaiswal said.
He also justified the government’s decision to involve private players.
‘If we have the coal and cannot use it, then what’s the point in having it? We encourage private players Trinamool Congress MP Kalyan Banerjee, chairman of the parliamentary standing committee on coal, had observed that the ministry should have first allocated the fields to the state-run CoalIndiaand then distributed the rest among private players.
Sources in the coal ministry said that was exactly what was done. They revealed that the maximum allocation was made to CoalIndiaand after that the private players were given captive coal fields, a claim made by Jaiswal as well.
‘The demand of CoalIndiain the 12th Five-Year Plan has been met. In fact, 112 coal fields have been allocated to the company, enough to meet its demands for the next 30 years,’ he said. On allegations of irregularities committed by some private players, Jaiswal said the ministry had taken action against errant companies.
‘After 2009, we have already conducted the review process. Licences given to 25 private players have been de-allocated and the rest have been asked to obtain environmental clearances or else they too would end with their licences being cancelled,’ he claimed.
Prime Minister Manmohan Singh has been under attack since the Comptroller and Auditor General (CAG) report indicted the government for irregular and arbitrary allocation of coal blocks to public and private players, causing massive loss to the state exchequer.
The CAG report says: ‘Even as the PM on October 14, 2004, decided on allotment through competitive bidding with effect from June 28, 2004, the coal ministry followed the screening committee as an escape route for allotments till date with the approval of Prime Minister’s Office (PMO).’
Was the PM not kept in loop by his office then?
The PMO’s note on August 9, 2005, said: ‘After discussion, it was decided that the Cabinet note put up by the coal ministry for competitive bidding as a selection method for allocation of coal and lignite blocks for captive mining will be amended to take into account the concerns of the state governments where the blocks are located.’
The BJP stepped up its attack on the PM and also slammed Congress president Sonia Gandhi for defending him.
‘You say the allegations against the PM are baseless. I am sorry to say, Soniaji, you have not done your homework,’ BJP spokesperson Ravi Shankar Prasad said.
Pointing out that the coal ministry was under the PM for most of the UPA’s tenure, he said: ‘Why should the PM not be investigated?… Soniaji, you have objection to this. Do you want us to felicitate him?’
P CHIDAMBARAM TO HEAD GROUP OF MINISTERS ON COAL REGULATOR
NEW DELHI: The government has chosen home minister P Chidambaram to head the group of ministers (GOM) to decide on a regulator for the coal sector. The union cabinet had referred the draft coal regulatory authority bill to a GOM on May 10.
The coal sector has been in the headlines over the last few months with the Comptroller and Auditor General ( CAG) alleging a loss of 10.67 lakh crore to the government on account of allotment of coal blocks to 100 private and public sector companies between 2004 and 2009.
The regulatory authority is proposed to be put in place to encourage investments in the coal mining sector, enable a level playing field and ensure a transparent allotment process for future coal blocks.
The move to appoint Chidambaram to head this crucial GOM at this juncture has led to speculation about the future of finance minister Pranab Mukherjee, who is reportedly among the front runners in the presidential poll.
Mukherjee has headed most of the economic ministerial panels and empowered groups till now on a wide range of subjects ranging from gas pricing, to ultra mega power projects, aviation and captive coal mining among others.
According to reports, the cabinet decided to refer the matter to a GOM as there were differences between the ministers over the powers to be given to the regulator. According to the draft bill the regulator’s function included authorising companies to take up mining, monitoring and enforcing closure of mines and determining price of raw and washed coal.
The GoM, which has been notified, includes the coal minister SP Jaiswal, the law minister Salman Khurshid, Veerappa Moily, the corporate affairs minister and Montek Singh Ahluwalia, the deputy chairman of planning commission.
The coal sector remains a controlled sector where private investments are permitted only conditionally with end-use restrictions.
COAL INDIA DROPS PLAN FOR DIRECT IMPORT OF COAL
KOLKATA: Coal India (CIL) has dropped plans of importing coal directly and will instead ask MSTC to import on its behalf if it is forced to import coal to meet its supply obligations.
A CIL official told FE that the company has decided to keep itself free from any import activities and stay away from long-term import contracts in favour of yearly deals. This is in sharp contrast to what CIL was considering a few months back — long-term import contract preferably for 10 years and at prices at least 10% lower than the index prices during the corresponding period.
CIL chairman and managing director S Narsing Rao said that CIL would be able to supply 65% of the trigger level to its customers and there would be a 15% gap between its committed quantity and the quantity it would be able to supply.
The trigger level has been fixed at 80% of the LOA quantity. According to norms, any party failing to supply or failing to lift the trigger level quantity would be subject to penalty. CIL has fixed only a 0.01% penalty on the value of coal not supplied and that too is to be implemented after three years. So, for three years CIL would not have to fork out any money on account of penalty. That relieves CIL from pressures of meeting supply obligations, if it was allowed to continue with the newly-framed fuel supply agreement (FSA) clauses.
“If customers force CIL to import, it will only import the required quantity to bridge the supply gap. If at all CIL has to import, it will import through companies that have experience in it,” Rao said. The new FSA has put a clause: “If the government-run firm needs to import coal to meet its obligation, customers will have to accept the price it charges or surrender their right on contract quantity.”
According to a CIL official, not all customers would require imported coal or would like to pay the prices of imported coal. Many would be happy with 65% of the trigger level supplied. So, long-term contracts could pose problems for CIL because there were chances that ultimately it would not have customers.
CIL got 27 proposals from 16 companies for long term supplies and it also finalised the request for proposals (RFPs) for circulating among the interested parties. CIL was trying to tie up for around 250 million tonne of supplies per annum.
While former CIL CMD PS Bhattacharyya initiated the process, NC Jha, another former CMD, carried it forward. There were also plans that CIL would form JV with Shipping Corporation ofIndiaand tie up with the railways for providing logistics solution. But Rao changed the course with Zohra Chatterjee, additional secretary, coal and CIL CMD in charge for a brief period shielding CIL from penalty with the new FSA clauses.
GVK COAL PROJECT IN AUSTRALIA UNDER GREEN THREAT
NEW DELHI: The Australia government has said it would delay environment clearance to GVK Power and Infrastructure’s A$10-billion ($9.72-billion) coal mining and rail project in Queensland province, in a move that would set back the company’s plan to tap the strong demand for coal in India.
“I am stopping the clock on the Alpha project. We have no interest in a delayed process. But we are not willing to compromise environmental standards,” environment minister Tony Burke was quoted as saying by agencies. He said GVK must work with national authorities to secure clearance for the project.
This came as a surprise as the federal government was not expected to halt environment clearance to the project which had already bagged the go-ahead from the provincial government. However, GVK remains confident about securing federal government’s green nod for the project. “The work conducted over the last four years has been extremely robust and a very detailed process has been followed. GVK remains extremely confident of a positive outcome,” the company said.
Last year, GVK acquired 79% equity stake each in Alpha Coal and Alpha West Coal Mines and 100% equity stake in Kevin’s Corner Coal Mines, located inQueenslandfrom Hancock Coal Pty for $1.26 billion. These mines have reserves of about 8 billion tonne and a capacity of more than 80 million tonne per annum. When combined, these projects will create one of the largest thermal coal mining operations in the world. GVK has acquired 100% stake in a 500 km rail link and a 60 million tonne per annum port as part of the ‘pit-to-port’ logistics solution.
The conservativeQueenslandgovernment, elected in March, is keen to clear a backlog of resource schemes, with around A$51 billion of projects awaiting approval. Last week, it gave the go-ahead for GVK’s Alpha project in a move that would normally trigger a 30-day deadline for approval from the national government. But Burke said the new state government was shambolic and that its approval fell short of national standards.
Burke said officials from GVK were already working with the federal government and that he was confident a decision could be made ahead of the company’s planned final investment decision on the Alpha project later this year.
The scheme is the front-runner among several projects in the untappedGalileeBasininQueensland, where rival Indian group Adani Enterprises is planning an A$10.9-billion coal and rail project.
The decision reflects a tougher national approach to projects which could impact on the Great Barrier Reef off theQueenslandcoast, and follows a UN report warning of threats to the reef posed by industrial developments.
GVK GALILEE PROJECT UNDER AUSTRALIAN GOVT SCANNER
HYDERABAD: The GVK Group’sGalileeBasincoal mine project has come in for Australian Government’s scrutiny after the recent environmental assessment nod by the Queensland Government.
The Federal Environment Minister, Mr Tony Burke, in a statement had mentioned that the Queensland Government had failed to provide sound assessment of the project.
He is reported to have mentioned that this project called for closer assessment covering some of the missing aspects necessary for clearances.
Reacting to the developments, GVK said it was committed to norms and confident of a positive outcome.
The Minister’s statement was being interpreted as if the environment clearance has been put on hold.
GVK further stated that it is equally concerned about the environment and will co-operate with authorities in the process. It expressed confidence that the company will achieve a positive outcome for the project.
After receiving environment clearance from the Queensland Government, GVK will need to seek federal clearance.
The Federal Government seeking additional information or clarification is not unusual in the process of securing a final Federal Government assessment, it said.
The Hyderabad-based GVK Group last week had informed about the local Government clearing environmental assessment for the Alpha Coal Mine project along with approval for a railway line and port projects. The company had hinted at an investment of up to $10 billion in phases.
GVK had gained interest in these mines after it acquired the Hancock coal mine projects for $1.26 billion in 2010. It invested in Alpha, Alpha West and Kevin’s corner with total resources of eight billion tonnes of thermal coal.
GLOBAL COAL PRICES COOL, BUT WEAK RUPEE WORRIES IMPORTERS
KOLKATA | MUMBAI: Power companies that use imported coal have got a respite from skyrocketing fuel costs as international coal prices have softened considerably, and are projected to fall further, but the depreciation of the rupee has limited their gains.
The coal price index for Australian coal, popularly called the NewCastle Index, and an Asian benchmark had jumped 92% between April 2009 and March 2011 to touch 127.87, but has cooled off to 98.24 last month, dropping 23% over the past year, including a 14% decline since May. API4, the index for South African coal, mirrored the trend.
Experts believe that the prices may decline further in the months ahead, making it easier for Indian power generation companies that are reeling under short supply of coal from CoalIndia.
Power producers such as NTPC, DVC and the Adani group say that generation cost in the past few months has declined by up to 5 paise per unit as the rupee’s depreciation limited the benefit of cheaper coal.
“Rough estimate shows that the cost of generation will go down by 2-3 paise for every unit of power generated,” an Adani Power official said.
A senior NTPC official said: “Although international coal prices have declined, a rise in rail freight and substantial depreciation of the rupee have negated some of the declines for Indian companies. Nevertheless, taking into consideration all the factors, cost of generation has declined by 4-5 paise per unit.”
Debasish Mishra, senior director at Deloitte Touche Tohmatsu India, said: “We expect coal prices to soften further over the next year as demand from China continues to decline and Japan restart its nuclear reactors, thus reducing its dependence on coal.”
A top executive from a private utility, which buys significant amount of coal from the spot market, said he expected price to fall further. “It is a big relief for Indian power utilities who are buying from the spot market. This would improve our margins, especially on merchant power sales,” he said.
“During January 2012 thermal coal prices went out of bounds for a large number of users, including power and cement producers. Now price is softening due to gradual slowing of global economies. In fact, coal prices inMalaysia,South Africa,Ukrainehas already come to stable levels from their unrealistic highs of December-January last. The coal from Malyasia andIndonesiais now ruling at $82-84 per tonne against $90-95 per tonne even six months ago,” Gautam Kumar, director, Asian Minerals, told ET.
According to reports, thermal coal prices inEuropehave dipped 15% this year to the lowest level since October 2009. Coal prices have eased 10% inSouth Africaand 13% inAustralia, the lowest levels in at last 19 months.