The Business Bytes
TBB BUREAU
NEW DELHI, DEC 21, 2021
The Indian Captive Power Producers Association (ICPPA) is the apex body of Captive Power Producers (CPPs) in the country. Its member industries form the backbone of national growth & infrastructure build-up, and include the Aluminium, Zinc, Sponge Iron, Cement, Chemicals, Paper, Textile, Tyre industries among others.
Out of a total 78,000 MW installed CPP capacity in the country, around 40,000 MW (i.e. 55 per cent) CPPs are thermal-coal based, which require 200 million MT coal per annum. Significant investments to the tune of $30 billion have been made for setting up these CPPs and associated infrastructure, which have generated 15 lakh direct and in-direct employment. The CPPs provide grid stability as they operate with minimum T&D losses, reduce demand pressure on the National Grid network, and pump excess power into the grid, thereby contributing to the national energy pool.
The Non-Regulated Sector (NRS) in India consisting of Captive Power Plants (CPP) is, however, struggling to retain cost-competitiveness and sustainable industry operations due to the ongoing situation of non-equitable treatment when compared to the Power Sector, specifically with regards to allocation, coal linkages, railway rakes, materialization, coal pricing etc.
The Ministry of Coal guidelines for Auction Linkages for Non-Regulated Sector dated February 15, 2016), specifies the allocation of coal in proportion of 75 per cent (power) and 25 per cent (non-power). Despite that, the Non-Regulated Sector is getting coal to the tune of less than 20 per cent. Moreover, the NRS consumers must pay 20 per cent higher price over the notified coal price for the Power Sector, leading to differential coal pricing for different coal consumers. In essence, the sector is paying a premium for the very same commodity.
The Coal India has recently announced its decision to enhance the rake supplies to the Power sector to 296 rakes per day, in order to increase coal stocks level to 14 days from current levels of around 10 days. This is against the total 272 rakes supplied on a per day basis in the month of November. The proposed increase in coal rakes for Power Sector will further deprive the NRS consumers from getting sufficient coal rakes, and lead to a similar coal crunch situation recently witnessed by the NRS between August-November and other instances due to ad hoc decisions for stopping/drastically reducing the coal supplies and rakes for NRS/CPPs for diversion to the Power Sector for ‘Priority Coal Supplies’ resulting in coal crunch situation for the industry.
These ad hoc decisions have been taken without any advance notice, leaving the NRS industries with no time to devise any mitigation plan to continue sustainable operations, thereby bringing them to a virtual standstill.
In the month of November, out of total 272 rakes per day, the Power Sector was supplied with 255 rakes, while NRS was provided only 17 rakes against the actual requirement of 50 rakes per day. The proposed plan for December envisages just 26 rakes per day for NRS, possibly leading to a huge coal deficit through rail mode for NRS consumers.
Any abrupt stoppage of this secured coal supply will bring the industry to a grinding halt and have a severe impact on the SMEs in the downstream sector, resulting in increased prices of finished products with burden on end consumers.
Until the inception of the New Coal Distribution Policy (NCDP) in 2007, the CPPs were being treated on an equal footing with other power producers for linkage, supply and pricing of coal. From 1994, the Government has been exhorting industries to invest in CPP, and has incentivized them to boost manufacturing, relieve burden on grid, feed surplus CPP power to the grid & other consumers, and the industry was encouraged to make substantial investments in setting up CPPs & end-use plants. The NCDP makes no distinction between CPP and IPP, assuring coal for power, irrespective of the generation method, be it captive or otherwise.
The industry demands equitable treatment between the Power Sector and NRS with regards to coal and rakes allocation and prices, and seeks government support to normalize the coal rakes & supplies by earmarking at least 50 rakes per day for Non-Regulated Sector to enable optimum materialization and partner the economic development of the nation.
It also seeks immediate resumption of coal supply against linkages for sustainable industry operations, allocation of coal dispatches through rakes in proportion of 75 per cent (power) and 25 per cent (non-power), as per MoC circular for Auction Linkage, dated February 15, 2016, any decision for stopping/curtailing secured coal supplies should not be taken on ad hoc basis and the NRS should be given prior notice well in advance (1 to 3 month) to devise mitigation plan with respect to coal/power imports.
