WCL’s record-high coal output in FY20 helped gencos save cost. Here’s how

New Delhi: State-run Coal India subsidiary Western Coalfields Limited (WCL) is catering to the coal requirement of power consumers located in Central, Western and Southern part of India. MAHAGENCO (Maharashtra State Power Generation Company), MPPGCL (Madhya Pradesh Power Generation Company Limited), Gujrat State Electricity Board, Karnataka Power Corporation Limited, Haryana Power Generation Company Limited, NTPC- Mouda, Adani Power (Maharashtra) Limited are the major power customers to WCL. Apart from these, there are several non-power consumers who are dependent on WCL for their coal requirement.

During the FY’2013-14, WCL’s annual coal production was 39.73 Million Tonne and the overall offtake was 39.95 Million Tonne, out of which 27.28 MT (68 percent) was being dispatched to the power sector. WCL had to close down its 22 mines having production capacity of 11.20 Million Tonnes during the last five years due to exhaustion of reserves. For power sector consumers of WCL, sourcing their coal requirement from other coal companies means increased landed cost of coal due to additional freight cost.

In its endeavour to supply requisite coal quantity at an affordable price to its power sector and other consumers so that end-users get electricity at cheaper rates, WCL has planned the expansion of existing projects and opening of new projects by investing in additional land acquisition, employment against the land, obtaining forest clearance etc. During the last five years WCL has opened 20 new projects with an overall capacity of 45.64 Million Tonnes. These projects contributed 35.8 Million Tonnes of coal production. As a result, production of WCL during 2018-19 increased to the level of 53.18 Million Tonnes and the off-take increased to 55.56 MT, out of which 45.08 MT (81 percent) was dispatched to the power sector.

During FY’2013-14, coal dispatch to MAHAGENCO was 17.60 MT against the contracted quantity of 22.70 MT. Due to the opening of new mines and increase in production, WCL could dispatch more coal to MAHAGENCO. WCL dispatched 25.6 MT coal to MAHAGENCO during FY’2019-20. WCL produced the highest ever 57.64 MT coal in FY’2019-20 since the inception of company wherein contribution from new projects was over 71 percent.

Coal availability at doorstep made MAHAGENCO save significantly on account of freight compared to the huge transportation cost while buying coal from other states. As power plants are getting cheaper coal, the benefit to end consumers is being passed with electricity at cheaper tariff. The environmental damage due to the transportation of coal from long distances is also under control.

WCL has envisaged an ambitious plan of production from the current level of 57.64 MT to 75 MT in the year 2023-24 and further to 100 MT by 2027-28. It is estimated that the coal requirement of MAHAGENCO during FY 2020-21 will be around 35 Million Tonne. In view of the growth in production and dispatch, WCL is ready to cater to the entire coal requirement of MAHAGENCO from the year 2020-21 onwards by shifting their fuel supply agreements from other subsidiaries to WCL. WCL has already submitted a proposal to MAHAGENCO for sourcing their entire coal requirement from WCL.

With an increase in production, WCL will be able to satisfy the coal requirement of other consumers as well located at the central, western and southern part of India, who are presently taking coal from other subsidiaries.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)