Govt lets public, private power plants swap coal to cut costs

The government has allowed public and private power producers to swap their coal supplies with a view to reducing the cost of electricity by ensuring more efficient fuel usage. This facility may eventually be extend to other coal-consuming industries.

The centre said the rationalisation of coal linkages in the power sector has resulted in a decrease in transportation cost of coal from the mines to the power plants, leading to more efficient coal based generation of power.

''I would like to see the coal sector open up and achieve the next level of efficiency in power generation. Guidelines for coal swapping would be out in the next 30 days,'' power and coal minister Piyush Goyal said on Wednesday after launching a portal to facilitate such swaps.

An inter-ministerial task force, constituted in June 2014 for a comprehensive review of existing coal sources as also feasibility for rationalisation of these sources with a view to optimise transportation cost, had held several rounds of meetings with representatives from the ministries of coal, power, railways, steel, shipping, besides DIPP, CEA, NTPC, CIL, SCCL, subsidiary coal companies and KPMG.

Swapping between private and state entities is also aimed at improving the consumption of domestic coal by the industry, mainly the power sector, against the backdrop of high production and tapering demand on the back of reduced traction for power plants.

Goyal said he envisioned coal swapping to become a ''cross-sectoral'' initiative and not remain confined within the power sector. Such widespread freedom to swap coal supplies will set the stage for free trading of coal and prepare the sector for eventual deregulation, industry observers said.

The coal linkages have been allocated as per availability of coal from different mines. As a part of rationalisation exercise, 29.818 million tonnres of coal linkages having a potential annual saving of Rs1,512.85 crore were rationalised till the year 2015-16. In the current year, CIL has carried out further rationalisation exercise with NTPC for rationalisation of intra-NTPC plants and its JVs. This rationalization of ACQ of 8.05 MT from rail-fed TPPs to pithead TPPs resulted in potential annual saving of Rs800 crore. 1.459 million tonnes of coal quantity of UP State was rationalized leading to a potential annual saving of Rs60.15 crore.

CIL has also rationalised 1 million tonne coal quantity of three units of Maharashtra State (Mahagenco) resulting in a potential annual saving of Rs90.57 crore.

The government had allowed swapping of coal mines by users so that transportation cost can be reduced for generation of power. The government has allowed coal swapping in 19 blocks, which brought down the cost of power generation as users were able to source fuel from mines located closer to them.

In case a state decides that it could get better value by sourcing power generated using coal from a particular block to fuel a private power station, the electricity has to be procured through bidding amongst competing private sector plants. The state has to then mention upfront the source, quantity, quantum and delivery point for the power.

In case a state or central utility decides to move around coal among its own plants, the deciding criteria would be on plant efficiency, coal transportation cost, transmission charges and overall cost of power.