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How Will India Keep The Lights On?

India’s monopoly coal supplier Coal India has told the government it cannot supply enough coal to keep the lights on, so what’s the solution for the complex nation? Energy Publishing looks at how India’s power sector is approaching the issue.

Coal Publications | Market News | Mining In India
PRLog - Sep. 11, 2012 - BRISBANE, Australia -- India’s monopoly coal supplier Coal India has again told the government it cannot supply enough coal to keep the lights on in the country, so what is the solution for the beleaguered nation? The country must look to import thermal coal to ensure there is enough to supply power plants and, in turn, keep electricity supply running. But this is a process fraught by infrastructure restrictions, volatile coal prices and small power plants with limited resources to access what they need.

Several power generating companies are opting for more frequent, smaller volumes of imported coal, earmarked for specific plants and requiring suppliers to deliver at the plant gate of the specified power plant.

But will this work? Several larger Indian power generation utilities are beginning to adjust their coal import strategy in the face of changing international market dynamics and lingering uncertainty of domestic supply.

Last week Coal India Limited (CIL), the country’s largest coal producer, reportedly reiterated at a meeting in the Ministry of Power that it would not be in a position to increase supply to the power plants beyond the 389Mt already committed, despite requests by several plants for additional supply.

India’s official target for imports by power utilities is 70Mt for 2012-2013. Of this, 24Mt is the demand for eight plants designed to operate solely on imported coal. The rest is for plants designed to run on lower quality indigenous coal but which blend imported coal because of domestic coal shortages or to enhance performance at the power stations.  

A government official who monitors coal movements to the power sector, said that by the end of July, total imports by the power sector were around 18Mt, 5-6Mt short of what imports should have been up to that point.
In July, NTPC (National Thermal Power Corporation) cancelled a 5Mt tender after it determined that the offers of US$75-$85/t for GCV 5,000kcal/kg that it received were higher than international prices prevailing at the time. That delayed imports at the company by about two months, though it is now readying for about total imports of 7Mt over the next 2-3 months.

Several power generating companies are opting for more frequent, smaller volume, earmarked for specific plants and requiring suppliers to deliver at the plant gate of the specified power plant.

“Smaller packages are easier to deal with for geographic distribution, especially when it is specified for the plant. It also ensures better participation and helps us achieve more competitive rates,” a senior executive with a power generation company said.  
Power sector officials concede that while the earmarking of smaller packet imports specific to certain plants makes it more challenging to manage imports, it can help plants optimize fuel costs.
“It doesn’t make sense to import low GCV coal for plants located [away] from the ports,” the official said.
Several companies have begun experimenting with blending higher grade coal, possibly ADB 6,300kcal/kg, in plants located further away from the ports. The Central Electricity Authority (CEA) had previously released normative guidelines suggesting blending of up to 30% of higher quality imported coal at plants located near the coast and up to 15% for plant located more inland.
The segmentation of demand into smaller volumes earmarked for specific power plants, many of which are blending coal, is giving rise to opportunities for those who can structure the deals.
“We are clubbing the demand for several buyers together,” said Subhash D. Gogia, the India Country Head for Kucom, which supplies coal from its mines in Indonesia. Increased segmentation is creating a role for independent traders who may not be able to compete on their own but may be able to collaborate with international partners.

For more news and analysis on the Indian coal and power industries, subscribe to Energy Publishing’s Indian Coal Report.  With staff on the ground in India and the benefit of experienced journalists and analysts across the Asia Pacific region, the Indian Coal Report offers the latest news, in-depth analysis, market briefs and freight indices.  Contact us at marketing@energypublishing.biz for a free trial subscription.To view our range of leading reports, please visit http://www.coalportal.com

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