NTPC begins getting coal delivered directly at plants, private miners get bigger play

NTPC buys bulk of the coal from Coal India Ltd, India’s largest producer of the dry fuel

In a first, India’s largest power generator NTPC Ltd has begun getting coal directly at thermal power plants, the doorstep delivery could break the monopoly of Coal India Ltd (CIL) and boost the demand for the fuel from commercial miners.

NTPC’s new fuel sourcing strategy is a shift to a more market-driven approach and could be emulated by state as well as private companies.

“Since the beginning and until now, for some reason, it has been the genco’s (generation company) responsibility to get coal picked up from the mines, load it in the railway rakes, transport it and unload it at the thermal power plant. With the opening of commercial coal mines, we now see a possibility of this changing since there is competition and not just one sole producer, Coal India Ltd,” said a senior executive at NTPC, a public sector undertaking (PSU).

The PSU, with a consolidated power generation capacity of 77 gigawatts (GW), accounts for one-fourth of India’s power requirements.

The company procures the bulk of the coal from CIL, India’s largest producer, since commercial mines contribute about 14 percent to India’s production (1 billion tons in FY25) of the dry fuel.

Also Read: NPCIL, sole operator of India's nuclear plants, says 'renaissance' underway in journey to 50 GW capacity.

“Resultant to that tender, we have received about 3 million tons (MT) of coal through the doorstep-delivery method and hope to increase the quantum with the operationalisation of more commercial mines in the future,” a second senior NTPC executive said. The company urged CIL to do the same but the coal PSU expressed its inability due to existing fuel supply agreements (FSAs).

Both NTPC executives spoke to Moneycontrol on condition of anonymity.

States are likely to follow NTPC’s lead. “This can be done for the new FSAs that we intend to sign. Since a giant like NTPC has done it, several state gencos would follow suit as the strategy makes sense since it promotes a resilient coal supply chain,” an official with a state genco in India’s western region said.

It will mitigate risks of supply disruptions and price volatility, the official said.

Though the price of doorstep-delivered coal is higher than that of CIL, it is still cheaper than the imported fuel, which accounts for about 10 percent of NTPC’s consumption.

“The cost is passed through to the electricity consumer but the increase is minimal and could get cross-subsidised due to resultant lower coal imports,” said the first senior NTPC executive.

Also Read: NTPC to add 30 GW coal-fired power by FY32.

At least 125 commercial coal mines with a combined annual production capacity of 273.06 MT have been auctioned in India since 2020. Of these, 63 have started operations and the remaining are in various stages of development, data available on the coal ministry website says. While commercial coal mines will boost India’s coal production, they are also expected to generate an annual revenue of Rs 38,767 crore.