"Tata Power's 1,050 Megawatt power station in the state of Jharkhand is a textbook case of the absurd results that India's 1970s-era coal supply laws can produce, and why power utilities are lobbying the government to change them.
The Maithon power station is located in the heart of India's vast coal belt, but a shortfall in local fuel supplies has forced Tata to import some of the coal for the plant all the way from Indonesia an expensive and cumbersome alternative.
The company has a coal mine nearly ready in the neighboring state of Odisha, which is meant to feed another power plant whose construction has been held up by government red tape. Tata wants, but has so far not got permission, to use coal from that mine to fire the Maithon plant.
The case underscores how restrictive supply policies helped push up India's coal imports to a record high of nearly 138 million metric tons in the last fiscal year. India sits on top of the world's fourth-largest reserves of the fuel, but it has become the third-biggest coal importer after China and Japan, an estimate by the World Coal Association showed.
That is an anomaly India can ill afford, as the government fights to tame a current account deficit (CAD) that hit a record high last year and helped knock the rupee currency to record lows in August.
"At current import prices, we are talking about around $14 billion of coal imports, which is likely to go up to $25 billion by 2016/17," said Rahool Panandiker, principal at The Boston Consulting Group. "In this context, when there is a focus on reducing the current account deficit to $70 billion, every bit of increased coal production contributes to decreasing the CAD."
Prime Minister Manmohan Singh's administration has pledged to tackle chronic power shortages that hobble the growth of Asia's third-largeste conomy. But power companies are saddled with debt. Power stations do not have enough coal or gas to run at full capacity, and state-run distribution companies are too broke to pay for the power that utilities produce.
As a result, despite two decades of rapid economic growth, Indians consume only 900 kilowatt hours (kWh) per capita, compared to 7,000 in Europe and 14,000 in the United States, according to a recent note by consultants Bain & Company.
Most of the coal is dug up and doled out to power companies by state-run Coal India Ltd , the world's largest coal miner, which has struggled to modernize, raise its output and root out corruption within its ranks. Its dominance is a legacy of the socialist policies of Prime Minister Indira Gandhi's government in the 1970s that nationalized coal mining.
Such policies have been partly relaxed since that time. For example, instead of buying from Coal India, power producers can be allotted a coal mine of their own, known as a "captive mine", that they must specifically use for a particular power plant.
But the construction of such plants, such as Tata Power's plant in Odisha, can snag for years on red tape. That leaves a coal mine that no-one is able to use, while the same company has to buy coal from abroad to make up for shortfalls elsewhere".
Source: Xinhua
