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Uncertain outlook on expanding into power generation in India

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World Coal,

The government is not keen in Coal India Ltd’s (CIL) plan to expand into power generation, preferring the firm adhere to its main activity of coal mining. The reason for this is because, over the next five years, India’s demand for electricity is predicted to double to 2 trillion units. CIL is anticipated to invest up to US$25 billion to obtain the target of 1 billion t of coal by 2019/2020; this will be key to aiding India reach fuel security.

A government official who requested anonymity, said: “The core activity of CIL is not power generation, that’s NTPC. The core activity of CIL is mining. They should be the providers of coal to companies in India. That’s their job. They can do other things but that’s their primary job.”Coal India had formed Mahanadi Basin Power Ltd in December 2011 as a special purpose vehicle to set up a 1600 MW project in Odisha, with a planned investment of around Rs 6400 crore.

CIL meets over 80% of India’s coal demand and produced 494 million t in 2014 – 2015. It has plans to produce 550 million t in the year to next March.

NTPC Ltd is the largest power generation utility. It has an installed capacity of 44 598 MW and a 17% share in India’s power generation capacity of 267 637 MW.

Experts believe future large power projects should be located near the coal pitheads as a result of constraints in the transportation of fuel and cost of carrying ash-bearing Indian coal. Former Power Secretary, Anil Razdan stated: “One should focus on transmission lines for evacuation. It is understandable if they stick to their core competence instead of going to the downstream industry. However, if they can meet their commitment on the upstream side, which is the supply of the targeted quantity of coal, there is no harm in allowing diversification”. India’s power sector is the largest consumer of coal. It consumes 78% of local production and CIL produces 81.1% of the country’s overall coal production. “If NTPC can operate mines, why can’t CIL set up power projects as long as they meet their core commitments?” added Razdan.

India’s power generation capacity grew by 60% over the last five years but coal production only grew by around 6%. This changed in the last financial year, with CIL’s production increasing by 8.3%. Following the government’s plan of achieving energy security through obtaining 1.5 billion t of coal mined in the country by 2020, CIL needs to mine 1 billion t of coal. India’s per capita power consumption, approximately 940 kWh, is among the lowest in the world.

Edited from various sources by Harleigh Hobbs. Sources: Live Mint

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