Under the new coal distribution policy, coal consumers and producers have to enter into a pact known as the Fuel Supply Agreement for assured production as well as supply of the fuel. The clause dealing with 'trigger level,' which defines the minimum level of supply below which the coal producer can be penalised and thus acts as a deterrent, has emerged as a bone of contention between the two.

Trigger level cannot be forced - CIL

The large coal producer CIL has maintained that it is its prerogative to decide on the level of supply at which the trigger level can be set keeping in mind the lacuna between the production and demand target of coal set by Planning Commission for the terminal year of the XI Five Year Plan (2011-12). The coal firm said that it had always maintained an above 90 per cent coal supply level to state-run power generating facilities out of the committed level, but the 'trigger level' cannot be 'forcefully' set at that level.

The largest consumer of coal in the power sector, NTPC, presents its rationale supporting its demand, saying that it is aiming at a constant plant load factor or PLF, which defines the efficiency of the power facilities to generate electricity, at 90 cent and for this it needs a 90 cent assured supply of coal out of the committed quantum. This view was maintained by the Union power secretary and voiced many a times by NTPC chairman R S Sharma. The power major has not yet geared up to develop its own coal blocks with estimated reserves of billions of tonnes. Also, it is intriguing that NTPC, even while complaining of shortages in coal supplies has refrained from meeting its coal imports target.

As many as 1100 consuming companies of the fuel, out of about 1400, have inked pact with CIL for supplies. Out of about 25 power majors, around seven companies have signed the FSA with the coal producer. The deadline for power companies, including NTPC, to ink the deal has been extended by a month to 30 November, 2008. For the rest, it expired on 31 July.

Shortages affect efficiency - NTPC

NTPC consumes nearly 125-130 million tonnes of coal annually. The company lost production valued at Rs 94 crore in the past few months due to lack of fuel supply. Many of its thermal power stations were running on a low plant load factor as they did not have enough coal stocks. The normal PLF of NTPC projects hovers around 95 per cent. The company's thermal power station at Simhadri in Andhra Pradesh has a fuel stock of less than four days at a given point of time. The company's plants at Farrakka and Rihand were also facing coal shortages.

In a letter to power secretary Anil Razdan, NTPC chairman and managing director R S Sharma wrote that the company might have to shut down operations at several of its plants as they were facing shortage of the fuel. Though the company is importing 8.2 million tonnes of coal in the current financial year, it is still not adequate to meet its requirement.

The company has identified coal blocks in Indonesia, Mozambique, Nigeria, Australia and South Africa to import coal.

Not just the big companies; even the smaller state-run power generation firms have been complaining of coal shortage.

Few months back, CIL chairman Partha S Bhattacharyya had said that for the first time it will import four million tones of coal, to meet the fuel deficit of consuming firms.

In a letter dated 18 October, to all the major thermal power producers, including NTPC and the State electricity boards, Bhattacharyya offered to import coal on behalf of the power producers to bridge the fuel gap.

The power ministry has targeted to import about 20 million tonnes of coal in the present financial year to meet the rising demand. This is unlikely as international coal prices are at their peak. There is increasing dependence of power firms on the state-run producer of coal.

Steep increase in production target of coal

To meet the rising demand, CIL has been asked to revise upwards its annual production target for 2011-12 to 600 million tonnes from the earlier 520 million. Planning Commission has pegged coal consumption for the said period at about 731 million tonnes and production at about 680 million tonnes; boththese targets are likely to be revised with the changing economic dynamics and increased capacity addition of coal run thermal power stations.

At present, total installed capacity of the power generating units in the country is 145,000 MW out of which thermal power accounts for 53 per cent. Coal is the primary raw material for generation of thermal power. The government plans to add 78,577 MW power during the XI Five Year Plan and another 11,000 MW in captive power generation, taking the total capacity addition to 90,000 MW. The government is also setting up several 4000 MW coal-based ultra mega power projects. The demand for coal is thus bound to increase further.