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Coal-hungry India must focus on logistics: Jaiswal

Output from Coal India grew 2.7% while offtake has grown 4.7% in current fiscal that began in April

With coal likely to continue as the mainstay of India’s energy supply, the country needs to look at the new challenges posed by logistical constraints, in addition to the traditional issues of delayed clearances, for realising the Rs 62-lakh-crore infrastructure spending target for the current five-year Plan, Coal Minister Sriprakash Jaiswal has said.

“Around 55 per cent of our primary energy supply is coal-based. This situation is likely to continue in the future because of abundant reserves and low cost of the fuel with better security of supply,” Jaiswal said, while inaugurating the Business Standard Infrastructure Round Table 2013 here on Friday.

The summit, focused on “Developing a New Agenda for Infrastructure Growth”, saw the participation of about 120 industry delegates. These included Coal India Chairman S Narsing Rao, Jindal Steel and Power (JSPL) Chief Executive Officer (CEO) Ravi Uppal, Lanco Power CEO K Raja Gopal and India Infrastructure Finance Company (IIFCL) Director and CEO E S Rao, who also participated in a panel discussion following the inauguration of the annual event.

The coal minister said apart from the issue of securing green clearances, movement of coal from production centres to the consuming regions was emerging as a big challenge. Despite these, coal-based power generation increased 14 per cent last financial year, owing to a 12.2 per cent rise in coal supply to power utilities, at 339 million tonnes (Mt).

Jaiswal said the Cabinet Committee on Investment (CCI) had expedited decision-making in the infrastructure sector. As a result, a few blocks of state-owned Coal India were being developed through the partially private route of mine developer and operator (MDO) and 14 additional blocks had been allocated to companies under the new reserve auctioning regime.

During the panel discussion, Uppal stressed the need to focus on exploiting coal resources. “We have boundless quantity of coal, which is a natural resource, lying unused. The fraction of coal-based capacity has increased significantly in recent years.” He added the increasing use of supercritical boiler technology would cut carbon emissions.

The former managing director and CEO of engineering major Larsen & Toubro emphasised integrated planning by building pithead power plants to avoid wasteful transportation of coal from the East to the West. He said a host of new issues that were earlier dormant, including green clearances and land acquisition, had started surfacing, owing to the gigantic scale of new power capacity addition.

India added 56,000 Megawatts (Mw) of fresh power capacity in the last Plan period ended March 2012, against 21,000 Mw in the 10th Plan and 20,000 Mw in the Ninth Plan.

A total of 76 per cent of the 11th Plan period’s capacity addition was based on thermal projects. “This is huge growth and we were not prepared for it. Most of the issues are the outcome of lack of integrated planning among ministries,” Uppal said.

Highlighting the growing logistics problem, CIL Chairman Rao said about 300 mt of additional supply potential was stuck for want of three rail corridors in Jharkhand, Odisha and Chhattisgarh. “If all these coal evacuation corridors were available, Coal India could produce an incremental 100 mt of coal within 36 months.” Work at one of the corridors — to connect Jharkhand’s Karanpura coalfield with the mainstream — has been languishing since 1994.

Lanco CEO Raja Gopal raised concern over long-distance coal transportation, which sometimes extended beyond 2,000 km. “It does not make sense to spend four times the cost of coal production on transportation of coal. Power projects have not come up at pitheads because of lack of integrated planning.” Gopal also pitched for doing away with tariff-based bidding for power supply and endorsed pan-India and complete regulatory sale of power to secure investor interest.

Due to the cash crunch for infrastructure projects, the panelists unanimously asked banks to relax norms on debt-to-equity ratios. “Banks must take a pragmatic view and should not insist on high equity participation from the private investor developing the project. Already, the burden of interest on debt is very huge on the company. Power capacity is currently set up at a cost of Rs 6-7 crore per Mw,” Uppal said. He highlighted another worrying trend — the slump in demand from beleaguered state utilities had led spot power prices to drop to Rs 2 a unit.

IIFCL CEO Rao offered a different perspective on funding issues by highlighting the lacunae in the way projects were structured. “Fund availability is not a problem, but appraisal of projects becomes difficult owing to land and environment-related issues.” He said IIFCL had not been able to disburse substantial funds for infrastructure projects simply because the proposals weren’t based on sustainable and bankable models.

Source: Business Standard