Power producers mull sourcing coal locally to trim costs, avoid global price volatility

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Moneycontrol News

In order to shield power projects from unpredictable imported coal prices and keep them viable, Indian power producers are now eyeing local coal sourcing. The shift in sourcing will also help companies trim costs and conform to the changing regulatory norms.

Producers like Tata Power, JSW Energy, and Essar Power are said to be among those looking to use domestic coal at plants meant to use only imported coal, according to a Business Standard report today.

JSW Energy has, in fact, already taken permission from the environment ministry for blending its imported coal-based plants with at least 50 percent domestic coal.

In an earlier interaction with analysts, JSW Energy’s Joint Managing Director and Chief Executive Officer, Sanjay Sagar had said, using domestic coal is an ideal hedge in the situation of volatile coal prices. It also leaves the company with the option of picking up imported coal whenever it starts making financial sense.

Tata Power, on the other hand, is looking at domestic coal due to Apex Court order that ruled against allowing compensatory tariffs on account of changes in international regulations. Among other options, the company told analysts it will consider blending domestic coal to see if losses at its Mundra power plant can be pruned.

Essar Power and Coal India are also in advanced stages to modify coal usage at various plants.

Kameswara Rao, Partner at PwC India believes while it is possible to blend domestic coal up to 20 percent, depending on plant design, it will happen only over a period of time as some investment will still be required to set up washeries, up the capacity of the coal-handling plants, get more land for storage, etc.

tags#Business#Coal India#Essar Power#JSW Energy#Tata Power

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