core sector communique

At What Cost Power – Rajib Maitra

The West Bengal Power Development Corporation Limited (WBPDCL) is in a strange quandary. Four years of run-away inflation has reduced the value of money hugely, yet the price at which it sells the power it generates has not been revised. Though it had asked for a revision in the pricing way back in 2008-09, the Government is yet to pay heed to its pleas. As a result, the entity is being forced to continue generating at a loss, rubbing salt on its own wounds of mounting debt.

According to the strictures, the Corporation sells its entire generation to the State Electricity Distribution Company Limited (SEDCL). The rate at which the Corporation sells this power is Rs 2.39 per unit which is not only the lowest in the whole of India, but has also remained unchanged over the last couple of years. Though the plea for the upward revision of this price was mooted way back in 2008-09, the state Government, faced with an impending election did not walk the talk. By the time the 2009 Loksabha results were out, the Government, tottering on the brink as it was, dared not tinker with a sensitive issue like price hike. Economic compulsions notwithstanding, the political fallout of increased power tariff, especially in the rural areas, was something that the previous Government just was not brave enough to face.

Mounting Losses:

But business does not understand the nuances of politics and the bells, they are keeping tolling. Unable to meet its mounting generating cost through its sales it was forced to meet the gap through bank loans – where the outstanding today stands at a whooping INR 875 crores. Add to it the borrowings from the Government which has reached critical mass at INR 320 crores and one will just about get the idea as to how desperate the case is turning out to be.

Supply Side Woe’s:

Now take a look at mess that is in the raw material front. Roughly 17,500 kgs of coal is required to generate every MW of electricity, the price of which has been steadily mounting. Having no control over the price of this vital input and forced to sell at a pre fixed price the Corporation is slowly sinking into a quagmire of lost hope. The Net Loss it has to bear on its debt laden back every month is an additional INR 140 crores – the cumulated loss being an astronomical INR 3,300 crores – not to mention the INR 550 crores that it owes to the Coal India Limited (CIL).   

If all the four PDCL units – Santaldih, Bandel, Bakreswar and Sagardihi – run at full capacity, it requires 50,000 tons of coal per day. Of this, about 55 percent is sourced from CIL, about 20 percent comes from the Corporation’s own coal mines (Tara East & West and Barjore), about 10 percent is imported which leaves a gap of about 15 percent.  If pricing is the devil that faces the Corporation today, then the deep Sea is certainly the supply security (or, the lack of it)!

As per the Fuel Supply Agreement (FSA) the CIL is supposed to provide the Corporation 14.33 million tons of coal per annum – 9.15 MT from Mahanadi Coal Fields (MCL), 4.15 MT from Eastern Coal Fields (ECL) and 1.3 MT from Bharat Coking Coal Limited (BCCL). However, due to various glitches at the CIL end, MCL supplies no more than 6 MT per annum. This huge shortfall has to be met by sourcing from BCCL at a price that is at a 40 percent premium over the notified price as per the FSA. That too is not the end of the story – the BCCL coal is so laden with boulders that the Corporation furnaces are often damaged leading to frequent trippings, which come with its attended share of hassles.

MOU versus Money:

To meet its requirements and overcome quality concerns the Corporation had also entered into an MOU with ECL whereby it used to access good quality (Grade A&B) coal. This grade of coal has been priced up by CIL as a result of which, sans tax, their availability to PDCL has zoomed to a price of about INR 5000 per ton, as opposed to INR 3,000 per ton earlier. Thus, even when it is hungry and has the necessary paperwork in place, PDCL is in no position to feed itself for the sheer want to monies.

Mines in Menopause:

To add to the woes, production from the Corporation’s own mines too is showing a downward trend. Tara is fast running out of mineable reserves and contributes about a rake and a half on average per day. PDCL’s other mine, Barjore, supplies another 20 rakes a month on an average.

Generating Excellence:

Surprisingly, despite all the odds, PDCL has been maintaining an enviable production record. It is now (supply constraints, fund crunch, moist coal, monsoon related logistic constraints notwithstanding) generating about 60 million units per day. In the peak season of March-April, it had generated a record 70 – 75 million units. As a matter of fact, if the ageing Bandel unit where attaining even a 50 percent plant load factor (PLF) is an achievement in itself is set aside, the other units combined have a PLF of 80% plus. Notably, Santaldih has a PLF of 100 %, followed by Bakreswar at 95 % plus and Sagardihi also at 95 %, making the new units of the Corporation at par with the best units of Indian power’s poster boy NTPC.

Onward Ho:

Of the various projects that the Corporation has drawn up for the future, the 6^th unit of Sagardihi (1X250 MW) will go on stream commercially by the Puja’s. Work at the Sagardihi 2X 550 MW has also started. However the Bakreswar 660 MW is hanging fire as are the proposed mines at Gangaramchowk (Bhadulia) and Pachowala in Jharkhand. The tender floated for another own mine at Damagoria (East) had to be scrapped because of Election Commission directives and is now awaiting the State Government’s decisions.

One price revision will open the Pandora’s Box for the entity, feels insiders. It has already taken the test by fire and is all ready to keep its tryst with destiny – and ensure that the resurgent West Bengal get all the power she needs to surge ahead towards the top of economically advanced states. We for one will keep our fingers crossed and hope the PDCL dreams come true!

(From Core Sector Communique)