The 3 Week Diet System

Tuesday, July 7, 2015

'Coal import dependence will reduce if CIL production goes up'

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July 07:

MUMBAI: Dependence on coal imports will reduce to up to eight per cent only if Coal India (CIL) meets the production of 1,000 million tonnes by 2020 and if auctioned coal mines are able to achieve their peak capacity in a timely manner, says an ICRA survey. 

"Measures are taken by CIL to double output to 1,000 MT by 2020. If CIL is able to sustain seven per cent annual growth in production during FY16 till FY20 and both the schedule II and schedule III coal mines are able to achieve their peak-rated capacity in a timely manner... 

"... overall dependence on coal imports could come down significantly to about 8 per cent by FY20," ICRA Vice President Corporate Sector Girish Kadam told reporters in a conference call. 

However, dependence on coal imports is likely to remain high in the near to medium term till FY19 and gradually moderate thereafter, given the overall challenges in coal mine development as well as risk of delays in ramp up of coal output by the allottees of schedule II and III mines, he said. 

ICRA, however, pointed out that the sector will face a challenge of over-supply of fuel, which would result into aggressive bidding in e-auction of coal blocks. 

"The aggressive bidding in coal e-auction by the winning bidders (with aggregate capacity of 6,000 MW) has led to risk of significant under-recovery and concerns on the viability of their operations," Kadam said. 

He further said that the subsidy scheme to encourage the utilisation of stranded gas-based projects allowing R-LNG (re-gasified liquefied natural gas) to initiate interim measure and its viability is dependent upon the fuel's prevailing price, exchange rate and availability of moratorium period on debt servicing. 

According to ICRA, the progress on tie-up of new long term power purchase agreements by state discoms, continues to remain slow with sizeable generation capacity having no long term PPAs. 

Besides, timelines for implementation of tariff compensation for the affected thermal IPPs remain uncertain. 

The extent of average tariff hike based on orders issued by SERCs in Rajasthan, Tamil Nadu and Uttar Pradesh, continues to remain limited at 5 per cent, as against that at 9 per cent for FY15 and 7 per cent for FY14, the report noted. 

"The financial position of state discoms in many states continues to remain weak, with large subsidy dependence and limited progress in loss reduction against the regulatory targets in some states and high-debt levels. 

"Moreover, the build-up of regulatory assets continues to be significant, at around Rs 84,000 crore, for discoms in these three states due to lack of tariff revision for a prolonged period and large delays in true-up of the cost variations," Kadam added.


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