Power tariffs to go down as government decides to set up four coal washeries

In a decision which will bring down power tariffs for consumers in Maharashtra, the state government has decided to set up four coal washeries in a joint venture with Western Coalfields Limited (WCL).

This washed coal will eventually replace costlier imported coal in the state power generation utility's power plants and bring down tariffs, said officials. This coupled with measures like swapping linkages to procure coal from mines located close to power stations will save around Rs2,000 crore to lower freights.

The move is a major shift in the Maharashtra State Power Generation Company Limited's (MahaGenco) strategy. In mid-2011, MahaGenco had stopped using washed coal due to issues over quality of washed coal supplied to it by private coal washeries and alleged that at times, poor quality coal was passed off as washed coal with coal rejects being mixed in it.

Maharashtra energy minister Chandrashekhar Bavankule said they would set up four coal washeries in a joint venture with WCL. "In the future, no imported coal will be used, its use will be brought to zero. We will used washed coal instead of it," he told dna.

Bavankule admitted that they had earlier decided to stop the use of washed coal due to the "corruption of private washeries."

Coal washing is a process wherein raw coal undergoes a process of beneficiation to reduce ash content and increase the gross calorific value (GCV). This enables greater generation efficiencies and reduces erosion of equipment and boiler tube leakages (BTL). Imported coal is mixed with indigenous coal to hike its GCV and also meet gaps in supplies of dry fuel.

"The washeries will be established at the WCL's pit heads… we will share the profits equally and the state government and the WCL will each put in Rs150 crore for it," said Bavankule.

The MahaGenco will also shift its 10MMT coal linkage from the Mahanadi Coalfields Limited (MCL) in Odisha to the WCL, which will let it source coal from mines located close to generating stations, and Bavankule said this would help save Rs 1,000 crore in transport costs and royalties.

"In 2017-18, we are planning to shift another 10 MMT linkage from South Eastern Coalfields Limited (SECL) (to WCL), which will save on transport costs and royalties to the Chhattisgarh government," he added, stating that this rationalisation would save a total of Rs2,000 crore.

Officials said sourcing coal from WCL instead of MCL would save Rs 421 crore in terms of lower freight costs alone, translating into a 10 paise per unit reduction in power tariffs.

"Four sites have been identified for setting up these washeries," said a senior MahaGenco official, adding that three of these were at Chandrapur and one at Nagpur. "We will wash only poor quality coal instead of the previous system where coal across grades was washed," he said, adding that discussions between the power generation utility and WCL were underway, with things likely to be finalised in a month.

"We have an order for imported coal underway at Bhusawal but will not place any new orders," said the official, adding that however, there was a chance that the plant load factor (PLF) of coal-fired plants was likely to go down due to imported coal not being used.

The MahaGenco has an installed power generation capacity of 12,077 MW, including 8,640 MW from coal-based thermal power, 672 MW by gas, 2,585 MW from hydro power and 180 MW from solar power.