Coal India seeks longer contracts for power sector

KOLKATA: Coal India expects to invite bids for long-term coal supplies to the power sector in the next few weeks as the government is close to finalising the policy for such auctions.
This assumes significance because large power generation capacities are lying idle for want of coal.

It will help the state-run monopoly miner pursue its production and sales targets while feeding plants that have been facing uncertainty of coal supplies and thus power generation.

In the meantime, the company has decided to invite long-term bids for 4 million tonnes of coking coal for the non-power sector in its first long-term auction this year.

"We have been given to understand that the government is close to finalising the modalities for auctioning long-term coal supplies for the power sector. Once it is notified we will initiate the auctions," a senior Coal India executive told ET on condition of anonymity.

The quantum of coal to be offered to the power sector in the auction will depend on the policy details, the executive said.

"In the meantime, we have decided to offer 4 million tonnes of additional non-coking coal for the non-power sector. This will be for long-term supply contracts," the official said.

According to power sector officials, about 48,000 mw of power generation is facing uncertainty of coal supplies. the situation has remained more or less the same over the past two years, ever since the government decided against handing over long-terms coal supply contracts on nomination basis.

This 48,000 mw capacity is in various stages of construction and is scheduled to come up by 2020. Of this, projects with 6,000-7,000 mw capacity already have power purchase agreements in place but they do not have coal supply contracts from Coal India.

"A 1,000 mw power plant requires around 4.5 million tonnes of coal a year. If we are able to supply coal to these plants that do not have any contracts, sales could rise by about 200 million tonnes," another Coal India executive said.

The company is also planning to offer about 130 million tonnes of coal through its regular e-auction route in an effort to achieve its targets this year.

This will be close to 20% of its total production. The e-auction volume will be in addition to the long-term coal supply contracts.