Power ministry irked by Coal India’s failure to meet supply

Having failed to supply sufficient thermal coal to the power sector under its commitment, Coal India (CIL) has been taken to task by the ministry of power.

The ministry has asked the country’s biggest coal miner to import coal to meet the 30 million tonnes (mt) shortfall in the total committed supply to the power plants in the country.

In case CIL tows the line, the Kolkata-based company would be importing coal for the first time in its history to meet the production shortfall.

“Our power plants may not be able to take off as CIL is not promising fuel supply of more than 300 mt for the next year. We need 330 mt next fiscal. We are adding capacity at a very fast pace, but if the plants do not get fuel, new plants will not come up,” said a power ministry official.

Sources said CIL has not signed any Fuel Supply Agreement (FSA) in the past two years with any power developer as the company wants to bring down the fuel guarantee clause from 90% to 50%.

“We understand that CIL’s fields are facing environmental problems, but then it must import coal to keep its commitments,” the official said.

The company recently signed a memorandum of understanding with the coal ministry to achieve a targeted production of 452 mt in fiscal 2012.

Analysts Raashi Chopra and Pradeep Mahtani from Citigroup Global Markets in an April 1 report expressed concern over CIL’s ability to meet this target. “Targeted production of 452 mt for FY12 (according to the MoU) is marginally ahead of CIL’s earlier estimate of 447 mt. FY11 target output has been maintained at 440 mt but we believe CIL is likely to miss this,” they said.

Citi’s current estimates incorporate production at 431 mt in fiscal 2011 and 447 mt in fiscal 2012 and despatches of 427 mt in fiscal 2011 and 447 mt in fiscal 2012, the analysts said.