NTPC may get more cancellation, warns Govt- ET

After cancelling five National Thermal Power Corporation (NTPC) coal blocks last week, the coal ministry is likely to warn the power company that two more of its fields would be deallocated, if it does not develop them immediately.

“We will soon send letters to NTPC, warning and directing them to develop Pakri Barwadih (Jharkhand) and Talaipalli (Chhattisgarh) coal blocks,” an official in the coal ministry said.

"Any further failure in development of the block(s) would lead to necessary action as per the terms and conditions of allocation, including deallocation of the coal blocks,” the official said. The estimated production capacity of Pakri-Barwadih block in North Karanpura coalfield in Jharkhand is 15 million tonne (Mt), while in the case of Talaipalli block in Mand-Raigarh coalfield in Chhattisgarh, it is 18 Mt. The geological reserves of Pakri-Barwadih is 1,436 Mt and for Tallaipalli it is 1,267 Mt.

The coal ministry had issued show cause notices to the power major in September last year, asking it as to why its coal blocks should not be withdrawn for its failure to develop these within the stipulated time-frame.

In the notices, the ministry had said both the blocks weren’t developed despite the issue having being raised at the Prime Minister’s level in January, 2007. Pakri Barwadih was allotted to the public sector firm in 2004 and the production from this block was scheduled to start from 2008-09. Tallaipalli block was allocated to NTPC to feed its 4,000-Mw power projects which has to start production by March-end next year, according to the coal ministry.

A couple of days back the Coal Ministry had sent letters to Gondwana Ispat and Andhra Pradesh Development Corp warning that coal blocks allocated to them would be cancelled if they failed to develop them in time. The government had last month said that the panel set up by the Ministry to look into the process of deallocation of coal blocks had recommended issuing warnings to 29 coal and three lignite blocks allocatees for bringing their production at the earliest. The panel had also suggested cancellation of 14 coal blocks and one lignite block to six PSUs, including NTPC and three private firms for failing to develop the mines. As part of its deallocation drive, this year the government has deallocated coal blocks of various firms, including NTPC, Damodar Valley Corporation, Jharkhand State Electricity Board, Baidyanath Ayurved Bhavan, Andhra Pradesh Power Generation Corporation Limited, and Bhatia International Limited.

Indonesian imported coal price hike set to hurt and power tariff

Private power producers, including Reliance and Tata, have sought the government intervention to tackle the possible spurt in imported coal prices, apparently making a case for increase in power tariff for consumers.

The plea of the private power utilities comes at a time when Indonesia's -- the largest coal supplier to India -- mining laws are making it mandatory that coal prices be based on international market rate.

In a letter to Power Secretary P Uma Shankar, the 14-member Association of Power Producers (APP) has called for setting up of an "expert committee" to find an appropriate solution to price issues related to imported coal.

Apart from Reliance Power and Tata Power, other association members include Essar Power , Adani Power, GMR Energy and Jindal Power.

Many private utilities have won projects via competitive tariff-bidding route and the imported coal supply was based on bilateral agreements with fuel suppliers, mainly from Indonesia.

"Current contractual framework does not protect power companies from coal price changes triggered by any 'change in law' event in the coal exporting country," the letter written by AAP Director General Ashok Khurana said.

Similarly, Australia is planning to collect taxes on general additional revenues from exports of coal and iron ore as well as impose carbon tax on Australian coal production.

According to the letter, these laws would push coal prices by $ 20-25 per tonne.

India imports about 50 per cent of its imported coal from Indonesia and around five per cent from Australia.

The letter has said that there should be a suitable tariff structure that would "allow pass through of fuel prices to the power purchasers".

Out of the 43,000 MW capacity worth power projects awarded through competitive bidding, about 13,000 MW generation is dependent on imported coal.

Power project developers should get protection in the power purchase contracts for coal price changes triggered by legal and regulatory changes in coal exporting nations, the letter said.

The utilisation of imported coal is expected to rise in the coming years, especially since domestic coal production has slowed down mainly on account of environmental issues.

Status report sought on captive coal blocks by June end

Intensifying drive against the firms sitting idle on coal blocks, the government today asked companies to give status report on the development of captive blocks allocated to them for the April-June quarter. “You are requested to send the detailed information for the quarter ending June 2011 in respect of allocated coal/ lignite block and associated end use project to this office by June 27, 2011,” the Coal Ministry has said.

The development comes on the heels of the ministry’s issuing warning letters last week to two coal block allocatees — Gondwana Ispat and Andhra Pradesh Development Corporation — that their allotments would be cancelled if they failed to develop them in time.

In May, the coal ministry took a decision to deallocate 14 coal blocks and one lignite block and to issue warning to 29 coal and 3 lignite allocatees asking them to commence production in time.

Since last month, the government has deallocated coal blocks of companies like NTPC, Andhra Pradesh Power Generation Corporation, Bhatia International, Shree Bhaidyanath Ayurved Bhavan, Jharkhand State Electricity Board, Damodar Valley Corporation and Gondawana Ispat Ltd.

It has also started issuing warning letters to firms asking them to either begin production of the blocks or see them being taken back.

NTPC coal block de-allocation issue hits a low

The coal ministry has cancelled allotment of five coal acreages, including three given to state-run generation utility NTPC, on the ground that the companies “were not serious in developing them”. This issue was highlighted by us in the article on competitve bidding for coal blocks The utility hit back, saying the decision was “irrational” and lacked “transparency” since the company has completed more work in its blocks than other private firms had done in their mines. The cancellation is contrary to coal minister Sriprakash Jaiswal’s recent statement, saying he would review the decision.

“NTPC is committed to timely development of these blocks and has put all-out efforts for early development… The whole process/decision of de-allocation is not at all transparent and needs a holistic and rational review,” a top company executive said. “If compared with the contemporary coal blocks, NTPC is ahead of others. Even the blocks adjoining to these coal blocks in North Karanpura coalfield are much behind NTPC’s blocks and yet they are not in the de-allocation list,” the executive said.

NTPC was given Chhati Bariatu (South), Chatti Bariatu and Kerandari blocks in Jharkhand. Chatti Bariatu and Kerandari blocks in North Karanpura coalfields were allocated in 2006, while it got Chatti Bariatu (South) in 2007.

The power ministry had written a letter to the coal ministry earlier this month, asking for an “urgent” review of the decision to cancel allocations to NTPC. The power ministry had expressed concern that NTPC’s plans of adding over 15,000-mw generation capacity were likely to get hit if the allocations were cancelled. The letter prompted Jaiswal to say his ministry would review its decision, provided the reasons put forward by the power major for its failure to develop the blocks were genuine.

Saharpur Jamarpani and Banhardih — both in Jharkhand — are the other blocks, where the allocation has been cancelled. Saharpur Jamarpani was allocated to Damodar Valley Corporation in 2007, and Banhardih given to Jharkhand State Electricity Board in 2006.Last year, the coal ministry had issued notices on allocation of 84 coal and four lignite blocks. It had sought explanations from the companies about why their allocation should not be cancelled.

Seven coal blocks identified for coal gasification

According high priority to promote clean technologies in coal mining, the Coal Ministry has identified seven blocks for development of underground coal gasification (UCG), said the Coal Minister, Sriprakash Jaiswal, on Monday.
These include five lignite blocks and two coal blocks, Mr Jaiswal said at the inaugural of Coal Gas 2011, a two-day event on clean coal technologies. UCG is an industrial process of converting coal into gas and is considered eco friendly.

The Government has already notified coal gasification and coal liquefaction as end uses under the captive mining policy. Two coal blocks in Orissa have already been allotted to two private companies for development of coal-to-liquid (CTL) plants,  Jaiswal said.

Stating that environmental challenges were going to be more stringent in years to come, Mr Jaiswal said coal producers and consumers will need to address such issues for sustaining the projected growth in our energy planning through technology adoption.

Focussing on coal beneficiation in a big way,  Jaiswal said Coal India is setting up 20 washeries with an annual capacity 111 million tonnes in the 11th and 12th Plan. The Government has already awarded 33 blocks for exploration and exploitation of coal-bed methane in four rounds of bidding and two have reportedly entered into commercial production, he said.

Speaking to presspersons,  Jaiswal said he expects clearances from the Environment Ministry to majority of Coal India’s 154 projects soon.  Jaiswal and the Environment Minister, Jairam Ramesh, met last week to sort out issues affecting the coal sector.

According to the Coal Ministry, about 154 project proposals of Coal India are pending with the Environment Ministry for clearances in various stages.

Indian coal Imports shoot up by 50% in 2011

India’s coal imports have shot up by nearly 50 per cent in the past five months in the face of domestic shortages, forcing Coal India (CIL) to say ‘no’ to new customers in the current fiscal. “After accounting for the existing commitments and the quantity to be offered under e-auction, the net coal quantity available to…New consumers would be minus 11 million tonne [this fiscal],” a source quoting CIL Chairman NC Jha said.

Jha had made this observation at a recent meeting chaired by Coal Minister Sriprakash Jaiswal to review the coal distribution policy. Coal imports between January and May went up by nearly 50 per cent to 44.7 million tonne, according to data compiled by industry portal ‘mjunction Services’. Imports were 30 million tonne in the same period last year.

In his presentation before the meeting, also attended by senior officials of steel and power ministries, Jha had painted a dismal long-term outlook. “If all the LoAs (Letter of Assurances) which have been issued fructify, the negative coal balance would range from minus 157 million tonne to a level of minus 254 million tonne during 2020-21,” he had said. Demand supply gap for CIL would be 137 million tonne in this fiscal against 69 million tonne in 2010-11.

The coal firms, including CIL, had been unable to achieve their planned production targets due to various constraints like delay in obtaining environmental and forestry clearances, land acquisition and local law and order problems.

Coal Ministry may review cancellation of blocks to NTPC

oal Minister Sriprakash Jaiswal today said the ministry may review its decision of cancellation of coal blocks allocated to NTPC, provided the reasons put forward by the power major for its failure to develop the blocks were "genuine".

"We can review our decision if the reasons given by NTPC for their inability to develop the coal blocks were found genuine," Jaiswal told PTI.
The development comes close on the heels of Power Ministry writing a letter to the Coal Ministry last week, asking for an urgent review of its decision of cancellation of coal blocks allocated to NTPC.

In the letter the Power Ministry had also expressed concerns that NTPC's plans of adding over 15,000 MW generation capacity were likely to get hit due to de-allocation of the blocks.

The Power Ministry had said that at a crucial juncture when the state-run power major has already spent Rs 175 crore for developing three blocks alloted to it, Coal Ministry's move of de-allocation would prove detrimental for the 12th Five-Year Plan's (2012-17) capacity addition plans.

"Some of NTPC's projects of 15,060 MW coming up during 12th Plan are yet to be accorded coal linkages, Barh stage II and Tanda expansion power projects scheduled to come up during 2012-13 and 2015-16 are linked to Chhatti-Bariatu and Kerandari coal blocks," the Power Ministry had said.

Last month, the Coal Ministry had cancelled allocation of five coal blocks, including Chatti-Bariatu, Kerandari and Chatti-Bariatu (South), to NTPC.

De-allocation of the blocks at a crucial stage means delays in NTPC plans and lesser availability of coal during the beginning of the next Five-Year Plan, the power ministry had said.

Stating that "delays in achieving milestones towards implementation of the project was due to several factors beyond the control of NTPC", the Ministry had said delays in environment and forestry clearances had proved road blocks.

It takes about two-three years to achieve environmental and forestry clearances. The construction at the site can commence only after receiving green clearances from the Ministry of Environment and Forest, it had said.

It had added that NTPC had made substantial progress in development of Chatti-Bariatu and Kerandari blocks.

To weed out non-serious players, the government, last year, issued notices to 84 coal and four lignite block allocattees for not developing the areas within stipulated time and sought explanation as to why blocks should not be cancelled.

In the beginning of May, the coal ministry de-allocated 15 coal and lignite blocks alloted to various firms

Coal India deal with Peaboy awaiting Govt response

Coal India Ltd's plan of picking up a 15% stake in US-based firm Peabody Energy's 600 million Australian dollar mining project in Australia may get delayed, as the coal major is awaiting the government's response on certain issues pertaining to the deal.

"It (the deal) will take some time as there are certain issues -- like the company should be listed -- related to the deal, which Coal India has referred to the government. After getting a response from the government, the decision would be taken," a top official in Coal India told PTI

Both the companies are mulling the formation of a joint venture company (JVC) to implement the project at the Wilkie Creek coal mine, in Queensland, Australia, owned by Peabody.

The US-based firm will have an 85% holding in the JVC, while the rest will be owned by Coal India Ltd (CIL).

The proposal had come up for discussion in a Coal India Board meeting held last month, wherein it was decided to refer the same to the Coal Ministry for certain clarifications.
    
"The Coal Ministry had earlier said that acquisition of the property in the overseas market will be confined to listed companies so that the there is not much problem during the valuation of the deal," an official in the Coal Ministry had earlier said.
    
However, since the proposed company would not be listed, "The board had said to refer the proposal to the government seeking clarifications whether Coal India can go ahead with the deal if the principal (Peabody) is listed," the official had added.
    
Earlier, CIL had said it was likely to buy up to a 15% stake in Peabody Energy Corp's Australian assets in early 2011-12 for an estimated $100 million (about Rs 450 crore).
    
Peabody Energy is the world's largest private sector coal company, with sales of 246 million tonne (MT) in 2010. The company claims to have 9 billion tonne of reserves and manages and owns an interest in 28 mining operations in the US and Australia.

Sub standard coal being imported by power generators

It seems thats the shortage of coal is forcing the power generation companies in India to opt for lower grade of imported coal. The environmental concerns raised for mining of cola might result in usage of sub standard coal and increased pollution/emissions. The social cost of such trends need to be incorporated by teh economists and enronmentalists. India’s demand is for sub 6,000 kc/kg  standard coal is increasing. It has low calorific value (cv) and low priced coal. India is dragging in Indonesian sub-bituminous and what might be seen as mining discard from Australia. “In the last week or so a cargo of low cv coal has gone from South Africa to India and the importance of that cannot be underestimated,” sources added.

Country’s growing appetite for low-grade, low-priced coal could give South African state utility Eskom fuel supply problems, Graham Parker, director of traders Traxys Coal, said. A shipment of 4,800 kc/kg coal, significantly below the standard grade of around 5,800 kc/kg for export coal, was sold last month to an Indian buyer by one of South Africa’s biggest mining companies, Parker said at the Navigate shipping conference.Lower energy content coal, which is mined simultaneously with export grade coal in South Africa, is almost entirely burned by state utility Eskom, which generates more than 90 per cent of the country’s power. 

Coal India to do away with compulsive Fuel Supply Agreements (FSA)

The widening demand-supply gap and depleting production of Coal India Limited has compelled the coal ministry to overhaul the national coal distribution policy. If the ministry has its way then soon a new distribution policy would be in place to serve the comprehensive coal linkage needs of core and non-core sectors by introducing adequate flexibility in coal supply to meet the growing demands of these sectors and promote energy security.

After a meeting with senior officials from coal, power and other ministries today, coal minister Sriprakash Jaiswal told The Indian Express that the distribution policy, which was over three years old needed to be re-shaped as due to ever-growing demand of the mineral from the power sector, it has virtually become impossible to provide additional coal to other sectors. Due to the negative balance of coal, the Standing Committee on Linkage for steel and cement could not be convened for the past three years, he said. This was also the reason why CIL’s policy for non-SLC (LT) category of consumers could also not be notified so far.

The existing policy mandates coal companies to meet 100 per cent requirement of defence and railway sectors at notified price, while meeting 75 per cent of the quantity of normative requirements of other linked consumers through Fuel Supply Agreements (FSAs). Under it Letters of Assurances are issued and all core and non-core sectors are required to enter into FSAs with the companies. The policy mandates the states to nominate their agencies to the Centre for transparent distribution of coal to small and medium consumers, whose annual requirement is less than 4,200 tonnes.

Lanco asked to honor coal contract in Australia

West Australia Premier Colin Barnett says he has made it very clear to Indian power giant Lanco Infratech it cannot renege on a coal deal affecting 10 per cent of the state's electricity supply.

Lanco paid $750 million in December for Griffin Coal's debt-laden thermal coal mine near Collie.

The coal mine, one of the biggest in WA, supplies about two million tonnes of coal per year to the nearby Bluewaters Power Station, which generates about 10 per cent of the state's electricity.

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However, Lanco told the power station's operator last month it would halt the coal supply from June due to financial difficulties.

Mr Barnett said he has written to Lanco reminding it of the company's obligations under existing contracts.

"It seems to me now they want to walk away from the contracts they purchased as part of that deal and the obligations to supply coal," he told Fairfax Radio on Wednesday.

"I contacted them and made it very clear we expected the contracts to be honoured, and we have made it clear we expect them to behave as a good corporate citizen, and I'm sure they will do that."

The WA premier said Lanco's position had been disappointing and although it had a right to mine the coal it did not have an automatic right to export it.

He said the contracts could possibly be renegotiated, but until then Lanco needed to honour the existing deal even if it was not commercially beneficial in the long term.

"They went in eyes wide open so we expected them to do their proper due diligence on the coal, the asset and also the contracts that Griffin had," Mr Barnett said.

"We can be sensible about that and try to resolve it commercially.

"But I don't think companies can come in here into Australia, into the Australian legal system, buy an asset and suddenly think they can redo all the existing obligations. That won't work."

Mining disallowed in barren land : Coal India to take 11.5MT hit on latest green directive

Coal India's annual output would fall by 11.5 million tonnes this fiscal because of a recent order from the environment ministry that requires a company to obtain forest clearances before mining even in barren areas if another part of the coal block has a forest.

At 9:45 am, shares of Coal India were trading 0.98% up at Rs 406.95 on the Bombay Stock Exchange.

The coal ministry has urged the environment ministry to withdraw the order. Coal minister Sriprakash Jaiswal said the directive has begun to impact existing and future projects.

"We are writing to Planning Commission deputy chairman Montek Singh Ahluwalia, finance and environment ministers to exempt coal projects from the recent directive. The latest instructions of environment ministry will have an adverse impact on coal production as most of the coal bearing areas are in forests," said the coal minister

Coal India says - Rake availability is not an issue anymore

Talking about the availability of rakes for transportation of coal Mr. Jha, CMD Coal India said, "The Indian Railways have added more rakes in their fleet. They have promised us to make more rakes available. Rake availability is not an issue currently."

The company is expecting to get 190 rakes per day by June.

Below is the verbatim transcript of his interview with Mitali Mukherjee and Udayan Mukherjee of CNBC-TV18.

Q: Last we spoke, you put out a guidance of 477 million tones in terms of volume off take in 2012. But when we spoke with the coal minister, he indicated that may be nearly 15-20% shortage this year. Would you like to relook your guidance, or can you do what you indicated in your volume growth?

A: I would plan first to liquidate our stocks to maximum extent, even though our MOU target for off take is 454 million tones. We have made our internal plans through interaction with the Indian railways to dispatch around further 27 million tones. This will be around 25 million tones more than our production plan. So, that would require a growth of something like 9.5%. We are currently doing at around 6%.

The gap between demand and availability projected for the year is quite large. The domestic availability was seen to be less, because of the logistic constraints. Now since the Indian Railways have added more rakes in their fleet and they have promised us to make available more rakes. We are hopeful that large part of this cap will be mixed from our stocks.

Q: How much is the availability of rakes gone up from the railways in these last few weeks? Given that extra availability how much of the stock which is lying with you, you think can be cleared up this year?

A: The availability of rakes in March was something like 182 rakes a day. In April it became 178 rakes a day which compared to the same period previous year was 158 rakes a day. So, there was a net addition of 20 rakes per day during this fiscal in April.

There had been some shortfall in May, not because rakes were not available, but because of certain law and order problem in two states. So, the rakes could not reach or transportation could not take place.

Rake availability currently is not an issue. Whatever rake is required, is available and is getting loaded. We have discussed with the Indian Railways only two days ago and they have promised to provide us 190 rakes per day in the month of June.

Q: When we spoke with Mr Jaiswal last week, he came out in stern support of Coal India and the e-auction process and the fact that cap as well should not be relooked at, has the final resolution been reached on this e-auction issue?

A: No proposal for e-auction has come to Coal India as such or I understand even to the ministry of coal. But, there has been some proposal by our ministry is they might have saying to planning commission. But the issue is that e-auction was initiated and is being held for those sectors of consumers who do not have access to coal.

That means they do not have linkages and those who have linkages do not get coal sufficiently. For sector other than power we have signed FSA for only 70% requirement. The annual contracted quantity for all sectors other than power, is only for 70% of their requirement.

The balance 30% they must source from somewhere. E-auction is the only source which has been made available to them and also to those consumers who do not get linkages.

This is because non-core sector consumer other than power, cement, other than steel are not getting any fresh linkages for the last 10 years. So, this was the route or mode through which the coal is made available.

Now, if that e-auction is stopped hypothetically, then from where will this sector get coal also 80% of this e-auction coal goes by road to the nearby by consumers and only 20% goes by rail.

So, at the moment, that rail mode e-acution coal can move by rail, if more rakes are available. But, road mode will completely stop, because that doesn’t go to thepower sector. So if that is stopped, then that will pile up in the stock.

80% of nearly 46-47 million tones is a huge lot of coal and if that doesn’t get sold, then who is the beneficiary? Neither the power sector, nor Coal India. The coal produced pile up in stocks.

So, that is why the honorable minster has very strongly said, that they will definitely do our best to supply as much coal possible to the power sector.

Q: Given the availability of rakes that you are getting, how much of the stock that is lying with you, you think can be liquidated this year?

A: 25 million tones.

Q: You are confident about that?

A: 452 million tones which is to be produced this year, plus 25 million tones, that makes up 477 million tones.

Q: But not more than that, you don’t think more than that is possible?

A: If we get more rakes in the months of third and fourth quarter, if I get 220 rakes and it is feasible to load, we will liquidate more stocks. I am not keeping stocks for keeping my inventory up.

The stocks of coal have to be moved and the only problem is the logistics. If proper logistics are available, what is my interest in not loading them? I will get more money.

Coal Distribution Policy to be looked into

The problem of deteriorating output growth in spite of regulations in the coal sector is casting a huge shadow on the coal market of India. The problem now appears to have escalated to a level that is persuading the government to issue further regulations to ensure increasing and steady supply of coal from the industry.

Coal industry has always been a highly regulated one; however, the policies undertaken by the ministry seem to be proving inadequate even for a sector such as power, which the government has prioritised with regard to the distribution of coal. The CIL said recently that the company can only deliver 41 metric tonnes of coal out of the 306 metric tonnes mentioned in the Letter of Assurances issued to the power sector for producing 65 gigawatts of energy in an expansion scheduled during the year 2011/12. The supply from CIL will ensure production of only 12 gigawatts.

Under the current policy regime of the Indian coal ministry, captive mining is set up for players apart from Central government and other central or state owned companies such as CIL and SCCL and Mineral Development Corporations of the State governments. Companies engaged in production of iron and steel, power, washing of coal from the mines and other end-uses the government notifies are allowed to produce coal, but only for captive consumption.

The government has also facilitated sub-leasing of isolated small pockets of coal deposits that cannot be developed in a large scale for the benefit of economic development and those which do not require rail transport for other private parties.

Despite this seemingly inclusive regime, coal production is below desired levels in the country, unable to cater to industries.

The Isolated mining pockets leased out to private parties are often under developed and present with insurmountable geological challenges. Mines with infrastructure, on the other hand, is rarely leased out. Since 1993 almost 40 such mines were allocated, and that too on a joint basis, which has lead to problems such as varied economic interests of the recipients and thus time bound development get strained and delayed. Out of these 40 mines allocated, only a few of them have been developed.

The government also reported of 46 delayed projects of CIL earlier during the month of May. The supply shortfall of output has brought the state owned CIL to the verge of dishonouring Letter of Assurances (LoA) that promise delivery of 450 million tonnes.

The Indian power sector was reported of receiving only 303 million tonnes as against the expectation of 335 million, down 10 percent, during 2010-2011. The total coal production on the other hand fell 6 percent during the same time.

In addition, environmental issues, land acquisitions problems and relating snags have lead the CIL to reduce its output target to 447 million tonnes as opposed to the preliminary target set at 520 million tonnes for the 2011/12 fiscal.

The government might free the CIL from such LoAs, in search of alternative amendments to the coal distribution policy to make it more inclusive and assure prompt delivery. However, the coal industry in India is yet to emerge, with possession of 10 percent of the world’s total coal reserves.