NTPC, Coal India resolve differences

 

 

New Delhi: NTPC and Coal India Ltd , both state-owned companies, seemed to have resolved their differences over the alleged poor quality of coal supplied by the country’s monopoly coal miner to India’s largest power generator.

Still, it is unlikely that the last has been heard on this contentious issue, with the ceasefire depending on both companies agreeing to a common method of calculating the gross calorific value (GCV) of coal supplied, and at the miner’s end. Calorific value refers to the amount of heat that can be generated by burning a certain amount of a fuel.

“We should jointly collect the sample. If at the receiving end there is a problem, we will try to find out the reason. NTPC has agreed to this,” Coal India chairman S. Narsing Rao said.

Earlier on Wednesday, before the two companies announced that they had resolved the issue, power minister Jyotiraditya Scindia said the issue “should be sorted out at the earliest”, and stressed the need for complete transparency.

NTPC has been sparring with world’s biggest coal miner over the poor calorific value of coal being supplied by its subsidiary Eastern Coalfields Ltd (ECL). Typically, the calorific value falls when the fuel is of poor quality or has impurities (which means more of it will need to be burned to generate heat, and, consequently, electricity).

NTPC claims that while it is being charged for coal with a calorific value of 5,000 kilo calory per kg, it is getting that with a calorific value of 3,500 kcal/kg. It has held back payment of Rs.2,000 crore to Coal India on this account and denies owing any money to the miner. Mint couldn’t independently verify NTPC’s claim on the quality of coal. The annual bills raised by Coal India on NTPC are in the range of around Rs.20,000 crore.

Arup Roy Choudhury, chairman and managing director of NTPC, confirmed that the payment to the miner would be made on the basis of GCV.

“The methodology for its measurement of GCV has to be acceptable to both the companies,” he said.

The genesis of the fight between NTPC and CIL goes back to the beginning of 2012, when the miner moved to pricing based on GCV from the useful heat value (UHV). Unlike GCV, UHV is a parameter which can’t be established through laboratory experiments. It is formula driven and discounts for ash and moisture content.

But there are other issues as well, including the coal mafia and the way mines are graded by the Coal Controllers Organization, a government body. A mine with a poor grading would not be able to produce coal with a high calorific value.

“The problem is primarily with the coal supplied from the ECL mines. They have been wrongly graded by the controller. After the shift to pricing based on GCV, ECL is the only subsidiary that has lost money,” said an NTPC executive, requesting anonymity. “While they have low quality coal, they have been graded high historically.”

“There is a need to take a prudent view of geological risks and incorporate the same in fuel supply agreements,” said Dipesh Dipu, a partner at Jenissi Management Consultants, a Hyderabad-based resources-focused consultancy. “These risks are pertinent and relate to the drift origin of coal in India such that within various seams and sometimes even within the same seam of a mine, quality can vary, leading to issues on inconsistent supplies.”

Then there’s the coal mafia, which controls many eastern coalfields and makes money by smuggling the fuel.

“Their mines are under mafia influence,” said the first NTPC executive, referring to ECL. “There are no silos for loading in parts of their mines and that results in all size of coal coming to us. There is no mechanized loading. There have been several instances where our people who have gone to the mines for sampling have been threatened by the mafia.”

Indeed, “while good quality coal gets siphoned off by the coal mafia, bad quality coal gets mixed (with what is supplied),” said another NTPC officer, who too spoke on condition of anonymity.

Many of India’s coal mines are located in remote areas. Illegal activities in mining areas, which have long been rife with criminal activity by organized gangs, include theft of coal and explosives and illicit extraction of the fuel.

Both Roy Choudhury and Rao declined comment on the coal mafia

 

Paritosh Ranjan

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