<div><em>State discoms refuse to buy costly power from power companies due to high level of debt. <strong>Neeraj Thakur</strong> reports</em></div><div> </div><div>Suddenly there has been an excess production of coal in the country and the power plants are not willing to buy it. Till 2013, Coal India was the punching bag for the power sector for failing to supply coal to power generators. The power companies complained that their production was stalled due to lack of fuel. </div><div> </div><div>Coal India, at that time was entangled in the ‘go’ and ‘no go’ issue, with the ministry of environment and forest clearance. With close to 200 mines waiting for approval from the environment ministry under the then minister Jairam Ramesh, the Maharatna company managed to increase its coal production to 494 million tonnes in 2014-15, an increase of 32 million tonnes over the previous year. The rise was against a dismal performance in the previous four years when it added only 31 MT between 2009-10 and 2013-14.</div><div> </div><div>The all India production of coal in 2014-15 increased by 8.3 per cent to 612 MT and it seems that Coal India, which produces 80 per cent of India’s coal, will have to slow down production at its mines as it finds no buyers for its product. What has led to this scenario?</div><div> </div><div>While there are several views on the subject, depending on who you are talking to, RV Shahi, former Power Secretary, believes that Coal India is charging a premium for its increased coal supply from the companies. “If there is excess supply of coal in the country, then CIL should provide coal linkages to the power plants instead of supplying it to them through MOUs (Memorandum of Understanding). The price of coal under a MoU can be 40 per cent higher compared to the notified price under a coal linkage," said Shahi.</div><div> </div><div>Power producers, on their turn, have not been able to sell their power to state discoms as they refuse to buy expensive power due to high level of debt on their balance sheets. They often complain of not having enough liquidity to make payments to the power producers. Even if there is a demand from the consumers, the discoms are not in a position to buy power. Shahi wants the government to look into the issue and wants Coal India to provide coal linkages to power plants to bring the cost of power down.</div><div> </div><div>However, Salil Garg, a power analyst with India Ratings believes that even a company like NTPC, which mostly gets coal through linkages, has not been able to sell power in the market. The net profit for Country’s largest power generator for the first quarter of 2015-16 came down to Rs 2,135 crore, from Rs 2,201 crore NTPC’s falling Plant Load Factor or PLF to 77.6 % from 84.3 testifies what Garg says.</div><div> </div><div>The spot market price for electricity at the power exchanges has touched a low of Rs 2.56 per unit which is a significant decline from the peak of 2008-09 when electricity was trading at above Rs 6 per unit.</div><div> </div><div>A look at the break-up of the core sector data shows how the gap between the production of coal and electricity has been increasing for some time. While the production of coal between February and June 2015 has not been less than 6 per cent, the situation is not the same for electricity generation. From 5.2 per cent in February 2015, the growth in electricity generation came down to an abysmal level of 0.2 per cent in June 2015.</div><div> </div><div>Garg blames this situation to the poor demand of electricity from the industry. While Index for industrial production touched a high of 5 per cent in February 2015, it registered a growth of only 3.8 per cent in June 2015. While economists as well as the government like to believe that these numbers are a sign of green shoots in the economy, it has been more than a year since the economy has been trying to convert these green shoots into a flourishing growth story. This is precisely the reason why power companies are not able to sign power purchasing agreements with the state electricity boards, a per-requisite for getting coal linkages from the government.</div><div> </div><div>Amidst all this demand supply gap, another threat that is looming large over the thermal power sector is the one from renewable energy. Recently, Madhya Pradesh received bids from global companies to supply solar power at Rs 5 per unit. This shows that the thermal power companies cannot afford to remain inefficient and produce power which is above Rs 4 at the plant and results in the retail price of above Rs 5 per unit. If the thermal power companies have to be in business, they need to find ways to supply power at competitive rates for the discoms to be able to buy from them. Otherwise, very soon the solar power companies would be eating into the business of thermal power generators.</div><div> </div>
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