IPPs stand to lose as India government cuts coal linkages
Livemint.com reported that even as the power ministry lowered its coal demand to 17,500 MW from 68,000 MW for the so called independent power producers, the Union ministry of coal has only agreed to give coal linkages to power projects having a capacity of around 150 MW. This is because India simply doesn't have sufficient coal reserves to meet galloping demand for power.
A senior power ministry official said that "We have had two meetings with the coal ministry. We have been told coal linkages can only be provided to projects with a total capacity of 7,500 MW. Of this, around 2% is for IPPs. This is after we had brought down our demand to 35,000 MW, 50% of which is IPPs from our earlier request for 1.25 million MW. Let us see what will happen."
Though coal ministry officials agree that production will not be able to meet demand, IPPs stand to lose as the bankers will not approve loans for the projects in the absence of assured coal supplies, delaying the financial closure that is needed for the developers to order equipment and begin work on the projects. This is in a situation where raising credit is already becoming difficult due to the worldwide financial crisis.
Most of the IPPs that are unable to secure coal supplies are located in Chhattisgarh, Orissa, Andhra Pradesh and Madhya Pradesh and they had applied in the past year for the so-called coal linkages that would give them an assured supply of the fuel.
A Hyderabad based IPP developer who didn't want to be named because he is still awaiting part of the coal linkages he had been promised that "While the coal ministry has expressed their inability, it is not that the country does not have coal. The shortage is purely because of mining inefficiency." So far, the developer claims he has incurred a cost of INR 100 crore, which will be forfeited if the company is not able to achieve financial closure.
Mr Dipesh Dipu principal consultant with audit and consulting firm said that "Mounting coal shortage and inability to meet the demand from domestic sources indicates inevitability of coal imports, which may not be as expensive now, as it was a couple of months ago. Falling prices of coal as well as transportation costs may mean import bills can be lower. This trend may help bridge the demand and supply gap for coal through supply contracts and even spot purchases."
Currently, IPPs in the country have a power generation capacity of around 20,000 MW based on fuel sources such as coal, gas and water.
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