Apr 23, 2013 07:48 PM IST | Source: CNBC-TV18

Coal India unable to meet power demand: NTPC CMD

Speaking to CNBC-TV18 about its differences with Coal India, NTPC CMD Arup Roy Choudhury said the company is not sure if the coal giant has the ability to meet the power sector's growing demand.

The crucial Cabinet Committee on Economic Affairs (CCEA) meet held on Monday shelved the coal price pooling issue  - pegged as the second biggest reform after the SEB restructuring - despite getting an in-principle nod in February 2013 for its clearance.

It is known that the power and coal ministries have been sparring over the pooled pricing proposal and analysts say NTPC has been opposed to participating in a pooling arrangement because it could place the power company's plants lower in the merit order of dispatch for SEBs.

Speaking  to CNBC-TV18 about its differences with Coal India, NTPC CMD Arup Roy Choudhury said the company is not sure if the coal giant has the ability to meet the power sector's growing demand. He insisted that the real issue is not about the quality of coal being supplied; that can be sorted out mutually. "The question is if CIL can supply the amount of coal demanded by the sector."

Below is the verbatim transcript of his interview on CNBC-TV18

Q: Your observations on the key takeaways from yesterday in terms of shelving coal price pooling and putting out two other options?

A: Price pooling has become a necessity because we are not able to mine our own coal. It is very unfortunate that we have the fifth largest coal reserves in the world and we are not able to mine it. We have also not been able to put in place a regulator so that we get more private sector miners to come in transparently and do mining.

Since there is not enough coal and since the capacity is there, one of the mechanisms is price pooling. We have nothing to say in this because our business model is different. It is actually the Discoms and the beneficiaries who would have to comment on whether they will be able to absorb the extra cost.

Q: You have already had a fairly prickly relationship with Coal India with regards to pricing and quality of coal. Now if coal price pooling as well is out the window in terms of a concept, does it make negotiations or discussions all that more difficult?

A: I think price pooling was never on the table as far as NTPC was concerned. It was being talked about for other projects. We no issue with Coal India, I think all are getting it wrong; there is an issue of principles on quality of coal on which we have been discussing. Neither of us has said that the issue is closed and thrown out of the window, we are still discussing it.

It is important for me to inform the beneficiary, as to what is the quality of coal that is burned. So the moment that becomes important, it becomes important that Coal India also is able to declare what is the quality of coal they are giving us. We are working towards it; I don't think that is a problem, we can sort that out amongst ourselves. The problem is that they are not able to mire too much and not able to match the power sectors demands.

Q: Could you tell us how much exactly will the power cost go up now that the coal price pooling has been held in abeyance? Some analysts are talking about a 50 paise hike. What is your view on how much tariffs could go higher?

A: If pool pricing has been kept in abeyance it will remain the same. If pool pricing is introduced, it is a hypothetical number. Coming back to NTPC, if you look at our average pool price and if we are allowed to pool our prices of electricity across the country it is Rs 2.90. So it the most attractive power in the country.

Q: There is some talk that NTPC will look to import coal independently and move out of the coal price pooling mechanism. Do you have all the approvals in place and would you look to do that within this calendar year itself?

A: I don't know how that is linked to price pooling because we have been importing coal for the last three years. We import our own coal. We do not go through Coal India to import, we had tried with them four years back but they could not import coal for us. Thereafter we have been doing fairly well and we have been importing our own coal. So this has no link with the pool pricing.

Q: Would you have to relook at whether NTPC would have to raise its coal imports going into FY14 given the paucity in terms of availability domestically because the fear about imported coal is that it may not be the most efficient mechanism for NTPC?

A: We are worried about imported coal. Talking about NTPC’s performance, you would be glad to know that in the last 30 months we have added 9000 megawatts and we were asked a question on why we are not adding enough capacity. This time we will come out with the highest turnover, we will come out with the highest profitability and we have achieved the highest capex. So once we have done all that we need coal or fuel to run our stations. It is not only coal, our gas stations are running at only 50 percent, we have no gas available. Going forward we have to shelve our gas expansion schemes. So the sector is not doing so well in terms of fuel.

So, we are worried and we have been importing for the last three years almost 12-16 million tonnes of coal.

However one must understand one thing that there is the other end of the consumer who is not able to consume more than a certain price increase because a 10 percent imported coal, raises the tariff by about 30 paise. It becomes very difficult. On the technical part up to 30 percent we have no problem; our boilers can mix up to 30 percent. If any consumer is willing to take power from us with 30 percent imported coal, with re-gasified liquefied natural gas (RLNG), imported gas, we are willing to give them as much power as they want.


Q: Are you feeling more confident then about how FY14 is shaping up both in terms of targets that NTPC can achieve and in the past we have talked about lingering issues with State Electricity Boards (SEBs). Is some of that getting sorted out you feel?

A: Up until now we have no problem with SEBs, we have been getting up-to-date payments. Our deliveries have been excellent; we have crossed 4000 megawatts last year in terms of capacity. Going forward in FY14 it may not be the same kind of number because we couldn’t start the gas projects but 14038 MW is our target for the 12th plan. 20000 MW of capacity is under execution.  I don't see any reason why we should not even exceed the 12th plan targets both in capex and capacity addition. I am quite upbeat about that.

Having said that fuel remains an issue, we are looking at various alternatives. We have recently got some low calorific value coal from Indonesia, which is equivalent to the coal that we get domestically. We have tried it in one of our projects, it has worked well. If it does well then we can probably go for straightaway importing low gross calorific value (GCV) coal for stations which are near the coast. That can augment certain amount of coal for our stations.

We have also gone ahead with water transportation. With the Inland Waterways Authority of India (IWAI) we are doing transportation of imported coal through the river Ganges for Farakka initially then go to Kahalgaon then go to Baran. That will also increase our coal availability.

We are doing all these things plus unconventional things and looking beyond. Now, since our mines have been restored, we are actively going into mining. All that is going to happen and I am very upbeat, the 12th plan is going to look very different for NTPC.

Q: The market has been quite vexed with this NTPC-Coal India issue with regards to the signing of the Fuel Supply Agreements (FSAs). Could you give us any sense of a timeline even on by when you think NTPC and Coal India can sign an FSA and this can be down on paper?

A: I am wondering why the market should be concerned? Has my generation gone down? Has Coal India started supplying me less coal? We are doing our generation; our profitability is as usual. So why the market should be concerned as to what we are doing with Coal India in trying to sort out the quality issues.

It is true that lot of infrastructure has to be put in their mining pitheads, they are doing it. By September they have agreed to third party quality auditor also. So things are going on but the market should not be worried at all because NTPC’s generation has not gone down and nor has the coal supply from Coal India.

Q: Just as a follow up to that, we understand that Coal India’s eastern subsidiary has stopped supply to NTPC because of non-clearance of some dues; can you confirm that to us and what the quantum of that dues are?

A: There are no dues as far as we are concerned. NTPC’s eastern coal fields have been paid as per the calorific value of the coal that they have supplied to us. The calorific value of the coal that they have supplied to us on a daily basis is available on our website in a most transparent fashion. So there are no dues.

There are some differences between what they bill and what they supply. That difference is not payable. There were one-two days of suspension of supply from them but it has been resumed. They were doing some research in between so the supply got delayed slightly. All the supply has been resumed.

However, we must tell you that this issue needs to be looked into. It is a larger issue. It is an issue of how the mines are graded in our country, it is an issue of how not that we are migrated from the useful heat value (UHV) system to the gross calorific value (GCV) system of measurement, how the infrastructure at the pitheads has to be developed to match this kind of system.

We are buying imported coal and we are willing to pay Coal India the way we pay for imported coal. Whatever they supply to us, we measure it in our station and we pay them. We are willing to do the same but there are a lot of things to be done there. Washeries have to be installed, crushers have to be installed, silos have to be installed, bomb calorimeters have to be installed, so many things have to be done which they are doing, not that they are not doing but it will take a little time. Probably we were too early to introduce the GCV system in the country and that is why we got into these problems.

Q: Finally on the recent Central Electricity Regulation Commission (CERC) order with regards to Adani Power etc and offering them some kind of interim relief, monetary relief because of the losses they may have suffered. Do you think that is something that could stand legally and do you think that is a welcome step for the power industry?

A: I am afraid, I should not comment on that. It is between them and the power purchase agreement (PPA) that they have signed with their consumer. If there is a willing buyer, there is a willing supplier, that should not be any problem.

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