INDIA: Government to cut coal allocation to companies

NEW DELHI: The government will cut coal allocation to companies that are not lifting the fuel for their promised project as it plans a crackdown on non-serious power, steel and cement firms that have secured supplies, while new power plants are idling because of the shortage. Power projects are the worst hit from the coal shortage as almost 17,000-mw capacity is stranded for want of fuel and another 5,593-mw plant commissioned in 2009-10 are generating only 45-50% of their actual capacity. 

The cancelled coal supplies would be allocated among companies whose projects are at advanced stages, a senior coal ministry official said. 

"The stock taking becomes important in view of the coal crisis. The standing committee on long-term linkages would meet in October to review the projects. We have received complaints about companies that have taken linkages but have no end use project or have not achieved required milestones," the ministry official said. 

After the review meeting, the coal ministry would send notices to companies that are not utilising or underutilising the linkages. "If the companies are not able to provide satisfactory responses, their linkages would be cancelled," the official said. 

The coal ministry in April revoked mining licences of 15 coal and lignite blocks holding 1.5 b tonne reserves. The licences were cancelled, as the holding companies could not meet the milestones. Coal linkages are made to power, cement and sponge iron units after examining factors like quantity and quality, time frame, location of the consuming plants and transport logistics. 

The coal ministry expects 137 million tonnes coal shortage during the current financial year. Stateowned monopoly Coal India has lowered its production targets for 2011-12 to 454 million tonnes from 461.5 million tonnes in 2010-11 due to forest clearance issues to coal mines. The company's coal output has almost stagnated although quarterly profit has risen sharply because of higher prices. 

Several Indian companies are relying on importing coal to meet the domestic shortfall but costs of foreign coal have risen, threatening the viability of big power stations, including UMPPs being set up by Tata Power andReliance Power.