Thermal power plants to use washed coal from Jan 1, 2014

The Ministry of Environment and Forests wants power companies to go green while improving efficiency. So, it has drawn up new guidelines mandating the use of better quality coal, report CNBC-TV18's Ronak Jain and Ashmit Kumar.

From January 1, 2014, thermal power plants will be using fuel that does some good for the environment. The coal they use will have to be washed. That essentially means that the content of ash in this will have to be lower than the usual coal, which contains 30-50% ash. The Environment Ministry argues this will also improve plant efficiency. The draft guidelines set a 34% ash content cap on coal used by any thermal power plant 500 km away from the pit-head, any captive thermal power plant with installed capacity of 100 MW and 500 km for the pit head, any captive power plant above 100 MW or standalone thermal power plant located in an urban or ecologically sensitive area. The raw or blended coal used by these plants should also not have a gross calorific value lower than 4000kcal/kg on daily average basis. This move has been welcomed. Oscar Veldhuijzen, partner, The Children's Investment Fund says, “Around two third of Coal India's thermal coal has gross calorific value below 4,000 kcal/kg, of which 75% is sold to thermal power plants. That translates into 50% of total coal output, which needs to be washed. This would be very favourable for the environment, de-bottlenecking of the railway system, greater consistency of coal which helps the power stations and Coal India's profits.” But India has a long way to go. Currently, only 4% of Coal India's production is washed. And its plans to hike washing capacity to 111mt would account for 25% of the current coal production. There are also concerns that this new requirement will increase the generation cost for power producers. While 100% coal washing may take five-seven years analysts say, a 50% price increase from washing all coal will increase the cost of power by 8% over the next four years.