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Jindal Chhattisgarh bother

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  • Published 16.09.13

Calcutta, Sept. 15: Jindal Power Ltd will have to buy coal through e-auction or import it to fire at least half of the new capacity to be added next year in Chhattisgarh.

Navin Jindal, chairman of Jindal Steel & Power Ltd (JSPL), said the plant would be commissioned as scheduled. JSPL is the parent company of Jindal Power.

“There is coal available abundantly in this area. We can procure from them. We can also import, if required,” Jindal said during a visit to Raigarh recently.

The Rs 13,500-crore project, which involves implementation of a 2,400-mega-watt thermal power capacity in two phases, is coming up at Tamner near Raigarh where Jindal Power is already running a 1,000MW plant.

The company has captive coal blocks for the existing unit. The open cast mine is located just 10 kilometres away from the power plant. It has received coal link for an additional 1,200 mega watt, leaving the fate of the rest uncertain.

Buying coal from e-auction can push up the production cost and make the project uneconomical. The average price of contracted coal from Coal India is about Rs 1,300 per tonne, while the e-auction rate is Rs 2,200 a tonne. Coal from open cast captive mines may cost Rs 400-500 a tonne.

Importing coal is likely to be difficult as transportation from the ports to central India through the railways will be arduous. JSPL has coal mines in Botswana and Mozambique.

According to industry observers, one option would be to increase capacity of the existing captive mine and mix coal from it with the ones obtained from linkages and e-auction.

Jindal, a member of Parliament from Congress, has been in the eye of the storm after the coal block allocation controversy last year. He is one of the largest beneficiaries of coal mines among private players.

At Raigarh, Jindal admitted to be “anguished” over the allegation of malpractice in allocation, saying the effort put in by JSPL to open the mine and put up the plant has not been appreciated.

“What are these blocks? These were abandoned by CIL because they were difficult to mine. Of the 200 blocks given to private players, only 30 started operations. Why? Because it is extremely challenging to start these blocks... Those who managed to mine should be appreciated and not criticised,” Jindal said.

JSPL has been one of the first companies to put up a merchant power plant from captive coal blocks. It sells power on a spot basis without long-term contract. This business model worked very well initially when merchant power tariff ruled over Rs 6-7 a unit.

However, merchant power tariff has come down to around Rs 2 a unit. “In the long run, prices come down, benefiting the people. But our example initially encouraged many to set up power plants,” Jindal said, rebutting criticism that JSPL used cheap coal to sell power at exorbitant prices, denying the benefit due to consumers.