NTPC recently realized its cherished dream of producing coal from its own mines. The first rake carrying coal left the Pakri-Barwadih (PB) mine in Jharkhand for NTPC’s Barh thermal power project in Bihar, on February 16, 2017. However, it has been a very long journey for NTPC—13 years.
In 2004 or thereabouts, NTPC decided to enter coal mining. It was to be a strategic and timely backward integration for the thermal-centric power generator. NTPC had targeted that it would meet 20 per cent of its total coal requirement through its own mines. The backward integration took root in October 2004, when NTPC was awarded the PB block. The Central PSU had then estimated that production would start in 2007. Unfortunately for NTPC, matters just did not turn out as expected. Over a decade was consumed tackling all sorts of problems and now, it appears that this achievement has come a tad late. (See: From Mine to Rake)
Subdued relevance
If NTPC could begin coal production in around 2007 as expected, it would have been a big achievement. It would be efficiently making up for persistent coal shortages. However, in recent years, the coal scenario has improved so dramatically that NTPC’s captive coal production achievement could have lost some of its charm. NTPC has around 40 GW of coal-fired power generation capacity that is spread across 19 plants. Its annual requirement of coal is estimated at around 160 million tonnes. (For a frame of reference, 1 million tonnes of coal is required for running a coal-fired power plant of 200 mw capacity, for a year.) Over the past two years, Coal India’s (CIL) performance has improved dramatically. CIL, a PSU under the coal ministry, is India’s largest coal producer with a share of 80 per cent in the country’s total output. In FY17, CIL is expected to produce nearly 600 million tonnes of coal, registering a growth of 11 per cent over FY16. This would be over and above the 8.5 per cent growth seen in FY16.
Meanwhile, NTPC, thanks to improved availability of coal, has seen its imports declining substantially. In FY16, NTPC imported 9.47 million tonnes of coal that was 42 per cent lower than the 16.38 million tonnes in FY15. In fact, in FY17, NTPC has not contracted any fresh imports, it is learnt. All the arrivals hereon would correspond to old orders.
Today, availability of coal is such that there is no coal-based power station that has insufficient supplies. All plants are equipped with a 28-day supply. In fact, the power ministry has advised CIL to go slow on dispatches. It is also learnt that CIL is reviewing its target of producing 1 billion tonnes of coal by 2020 – not that it cannot, it simply doesn’t need to!
The Central Electricity Authority is also planning to prioritize coal allocation according to the efficiency of the coal-fired power plant. In other words, efficient power plants (those generating relatively more for every unit of coal consumed) will get priority delivery of coal. Even on this count, NTPC would be a big beneficiary. The performance of NTPC’s coal-fired power plants has always been considerably higher than the national average.
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How much coal?
NTPC currently has 10 mines with total estimated reserves of around 7.2 billion tonnes. When all get into production, NTPC could realize a coal production stream of around 110 million tonnes per year. This, based on current capacity, would account for around two-thirds of its total coal requirement. The newly opened Pakri-Barwadih mine is expected to produce 2-3 million tonnes of coal in FY18, and this would be ramped up gradually. At optimum level, it could provide 15 million tonnes of coal annually.
Moral victory
For NTPC, the achievement of captive coal production has ironically come at a time when coal shortages are relegating to history. In using its own coal, NTPC could perhaps have access to cheaper coal, but it is too early to work out the actual savings. NTPC’s delay in starting production at the PB mine and the dramatic turnaround in Coal India’s performance were both very unexpected developments, and their simultaneous occurrence has somewhat dampened NTPC’s coal feat. All the same, it places NTPC as a rare company with diverse presence in the power value chain. Apart from coal- and gas-based power generation, NTPC is now into hydropower, renewable energy and even energy trading. In view of its proposed diversification, the company, in 2005, officially changed its name from National Thermal Power Corporation Ltd to NTPC Ltd—a shorter name reflecting an expanded business portfolio.
In a lighter vein, NTPC’s relationship with coal-fired power plants is so intense that even when it diversified into hydropower, the first project that it embarked on was the Koldam (‘Coal’ dam) hydropower project!
The journey from mine to rake
October 2004: Pakri-Barwadih (PB) block awarded to NTPC, coal production expected in 2007.
2004-2010: Slow progress on land acquisition, alleged lack of support from state government and alleged insufficient compensation to land owners.
December 2010: Contract for mine developer and operator (MDO) awarded to a joint venture of Thiess (a Leighton company) and Minecs. Production was targeted to start by January 2013. MDO could not deploy sufficient manpower and could not achieve demonstrable progress. There was also alleged irregularity in the placement of the contract on Thiess-Minecs.
February 2012: Work was suspended due to antagonism by local population.
September 2012: PIL filed in Supreme Court that seeks cancellation of 194 coal block allocations, challenging the basis of allotment. Supreme Court begins to investigate.
May 2014: NTPC cancels contract awarded to Thiess Minecs JV due to slow progress.
August/September 2014: Supreme Court cancels the allocation of over 200 coal blocks awarded between 1993 and 2010, under the screening committee of the government dispensation route. Thankfully for NTPC, PB among five other blocks spared.
November 2014: Rebidding for MDO for PB mine initiated.
March 2015: Centre reallocates cancelled coal blocks. NTPC regains its five coal blocks back—Chatti-Bariatu, Chatti-Bariatu (South) and Kerandari in Jharkhand, Dulanga in Odisha and Talaipalli in Chhattisgarh.
September 2015: NTPC appoints a joint venture between Thriveni Earthmovers and Sainik Mining as the new MDO for PB mine.
February 16, 2017: First rake containing coal from PB mine flagged off, destined for Barh power plant in Bihar.