An increasing demand-supply mismatch in the Indian coal industry has
triggered competing and often conflicting demands for incentives among
administrative and regulatory agencies for coal and thermal power
producers.
The Central Electricity Authority (CEA), the regulatory body for
electricity producers, has sought the introduction of the concept of
‘mega infrastructure status’ for all coal projects above
five-million-tons-a-year capacity for standalone and captive mines,
which would entitle them to incentives such as a five-year tax holiday
and exemptions from other local levies.
At the same time, the Coal Ministry has written to the Power Ministry
seeking the review of coal mines allocated to thermal power producers
since the former’s cost of production of coal was almost double that of
coal supplied by government-owned Coal India Limited (CIL).
The CEA has backed its demands for tax sops with a projected coal
requirement of 842-million tons a year by 2016, against a projected
availability of 450-million tons a year from CIL. According to the
industry regulator, even after assuming supplies of 100-million tons a
year from captive mines allotted to power companies, thermal power
plants would need to import 54-million tons a year by 2016.
The regulator has also sought policy changes to facilitate the
introduction of updated technology for improvements in productivity at
coal mines and the further relaxation of rules governing the import of
coal into the domestic market.
While the power regulator was batting for incentives for captive coal
blocks, the Coal Ministry has sent a note to the Power Ministry seeking a
review of coal blocks allotted to independent power producers and
investors in ultra mega power plants (UMPP), whose cost a ton of coal
production was double that of CIL.
The Coal Ministry has given the example of Reliance Power’s 4 000 MW
Sasan UMPP, which mined coal at a cost of $17.33/t against a of
production cost of $8.63/t for CIL in an adjoining block.
Consumers would have benefited from lower electricity tariffs had the
coal blocks of Moher and Moher Amlorhi, in Sasan, been allotted to CIL
with fuel supply agreements with Reliance Power instead of the former
mining the coal, Coal Secretary Alok Perti said in a communication to his counterpart in the Power Ministry, P Uma Shankar.
In view of this, the Coal Ministry has sought a review of the cost of
production of coal for all private investors in UMPP including that of
government-owned NTPC Limited, the country’s largest electricity
producer.
The exchange of missives between the two Ministries was prompted by a
draft report of the Comptroller and Auditor General of India, which was
leaked to the media. The report came down heavily on the free allocation
of coal blocks to private power producers resulting in massive revenue
loss to the Exchequer.
Source: Mining Weekly
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