DARKNESS LOOMS: Ratnagiri Power (Dabhol) still does not have assured gas supply (Pic by Sanjit Kundu)

India has an installed capacity of slightly over 145 gigawatt (GW). Of this, over half, or 77 GW, is in thermal coal projects and another 159 GW in gas/liquid fuel power projects. While nuclear power capacity adds up to 41 GW, the balance is in the form of hydro and other renewable energy projects.

At one level, the government promises to add over 78 GW of fresh capacity during the current Eleventh Plan, but even the existing assets are being underutilised due to fuel shortage. The nuclear fuel shortage has forced the Nuclear Power Corporation to slash production to half of plant capacity. And a coal and gas shortage threatens to aggravate this by delivering substantially less than the 145 GW installed capacity.

According to data from the Central Electricity Authority, peak demand has increased from 88 GW in 2004-05 to 106.9 GW during April-August 2008. During the same period, the peak deficit has increased from (-)11.7 per cent to (-)14.6 per cent. BW had earlier highlighted (see ‘Running Low On Coal’) how thermal power plants are running low on coal stocks.

In July, of the 38 coal-based power plants reviewed by BW, 27 had coal stocks far lower than the contracted amount. This month, of the 77 coal-based plants, the number of plants with less than a week’s stock of coal stood at 48, and those with less than four days’ stock - dubbed as critical - stood at 25.

Taking Stock
Ironically, the coal distribution policy of 2007 not only assures the power sector 100 per cent linkages, but also stipulates a legally binding fuel supply agreement (FSA) on commercial lines. Partha Mukhopadhyay, senior fellow at Delhi’s Centre for Policy Research, says the coal supply mechanism for power plants is generally accepted to be an inefficient yet functioning system. However, given the current situation, he says there is a need to undertake a study on where the coal is being diverted.

It gets worse when it comes to gas-based stations. Take, for instance, GVK’s new 220-MW Jegurudau power plant in Andhra Pradesh, which is ready but there is no gas supply. Commissioning of two other 909-MW stations (Gautami and Konaseema) is held up due to gas shortages. Official records show that for both the projects, “construction of project is completed in all respects” but pending critical area is “(non)availability of natural gas from Gail”. A back-of-the-envelope calculation shows that these two plants have the capacity to light up 15 million 1,000-watt bulbs for at least an hour. Another 2,600 MW of NTPC’s plants (Kawas and Gandhar) have been put on the backburner on account of “non finalisation of gas supply agreement with Reliance Industries Ltd”.

Documents accessed by BW show that the 41 gas/liquid fuel-based power projects — spread across the private and state sectors — barely get 58 per cent of their fuel requirements.

R.V. Shahi, former Union power secretary, says the industry has reached this stage because “there has been no gas production” matching the requirements for the plants.

Some power plants such as Kayamkulam (350 MW) in Kerala; Maithon (90 MW) in Jharkhand; Basin Bridge (120 MW) in Tamil Nadu; Tanir Bavi (220 MW) in Karnataka; and the 174-MW Cochin project in Kerala are awaiting supplies that would allow them to switch over to natural gas from otherwise expensive alternatives such as naphtha.

Mukhopadhyay says the gas shortage is a result of a variety of issues. He explained that one cannot understand why states with stranded assets are willing to pay close to Rs 10 per unit but will not source gas even if it yields them a tariff in the region of Rs 6 per unit.

According to a recent report on the power sector prepared by Crisil, the new gas utilisation policy of 2008 states that meeting the demand for “existing gas-based stations which are facing curtailed supply” is third in the list of priorities, after meeting the needs of fertiliser plants and for LPG extraction units. To quote, “New power plants are likely to be allowed only when the demand from other priority sectors has been met.”

Despite all efforts by the Centre to revive the erstwhile 2,000-MW Dabhol power project (now called Ratnagiri Power) directly under the supervision of the UPA government’s first empowered group of ministers chaired by Pranab Mukherjee, the project still does not have an assured source of gas supply for the entire unit.

Till the recently signed nuclear deal finally gives existing nuclear plants the required fuel to operate at full capacity a year from now, the question in people’s mind when they cast their votes would be, “Watts happening?”

kandula 'dot' subramaniam 'at' abp 'dot' in

(Businessworld Issue 23-29 Sep 2008)