India started off the electricity production with an average capacity of 1362 MW after independence, and now after 60 years a significant increase in the sector is noticeable with electricity lighting up the nooks and corners of the country. In spite of the 201637MW capacity of India’s power sector by the end of April 2012, an arduous journey of spanning the energy gap because of inflating energy demand lies ahead. During.the.year.2010-11, .our country encountered a power deficit of 8.5 percent and a top.shortage.of.9.8 percent.
Presently, a need of 150GW energy is faced by India. Due to shortage of power supply the current deficit of 30GW is predicted to exaggerate to a mind boggling deficit of 70 GW by the year 2020.
Maharashtra, Uttar Pradesh, Punjab, Haryana and Madhya Pradesh are the five major states that face the greatest power shortage. 10 to 12 percent of power shortage lingered on even though the capacity rose to 207006MW by August 2012. The peaking deficit also climbed to 11% and above during this period.
For the 12th Five Year Plan (2012-17) to achieve a GDP growth of 9%, an estimated additional capacity of 169815 MW power must be produced in the next decade. Only the establishment of large power generation capacity projects can support this gigantic desire.
The need of reliability of Indian power industry on thermal sources for coping with the ever increasing demand, still dominates over the Government’s initiative of electricity generation from renewable resources. Figure 1 shows the percentage wise contribution of the various sources to Indian power generation capacity.
This breakup of the fuel sources contribution is not expected to budge in the forthcoming years. Various reasons leads us to this conclusion, some of them are
1. Limited availability and high cost of wind based generation makes this technology a mere sight for the large energy demand of developing India.
2. Insufficient availability of Natural Gas makes the Gas-based power generation unviable for the current large scale demands. Also, the cost associated with it is substantial.
3. Commercial sustainability of the renewable resources in power production is contentious even with high government subsidy of VGF.
4. Large scale hydro power projects require government policies backing it and environmental issues associated make it difficult.
Therefore the right choice of technology which is economically efficient and environment friendly had to be chosen. The substantial journey of meeting the energy crisis using the thermal power brings us to the landmark scheme initiated by the govt. in 2005 named UMPP.
COAL PRICES-PROBLEM FACED BY MUNDRA UMPP:
International coal market for India has been unwavering considering the cost and accessibility for the former 4 decades. In the international market the bond for coal supply is for a short tenure, 5 years being the life for supply contract and for cost is even shorter (1 year). Ideally suited for catering to India’s demand are nation like Indonesia, Australia, and South Africa. Yet, over the time, nearly half of the international ties are formed with Indonesia due to the ease and better logistics involved and also due to cheaper cost incurred in mining.
The issue of ‘Regulation No.17/2010 on Guidelines on the Determination of the Reference Price of Mineral and Coal Sales’ by the Indonesian Ministry of Energy and Mineral Resources, in September 2010 ordered the coal and mineral producers to adhere to a regulated standard price for sale of minerals and coal, both domestic and international. This standardization of prices forced all the prevailing supply contracts to modification accordingly.
Also Indonesia is hovering over the idea of levying export duty on coal and minerals and imposing additional constraints on low-grade coal exports in brevity. South Africa, for perseverance of coal for additional domestic use is debating over export restrictions. ‘Green tax’ has been levied over exports increasing coal prices internationally by Australia.
Ironically, our own blaringly high coal demands have flared up the coal prices of these nations. Also the demand generated from China has aggravated the global coal prices. As a result of these changes, the global coal market has grown very unstable.
In the beginning ‘Tata Power’ for Mundra UMPP imported coal with the original prices established in the bid tariffs. Indonesian coal mines were contracted for almost all projects proceeding under Tata Power because of the precipitous discount in comparison to the prevalent market prices. A severe blow to the financial terms of contract made the coal cost incurred in Mundra UMPP shoot up.
Statistically, 150 to 200 percent record escalation of the imported coal prices are observed over the initial tariff agreed upon in the bidding process for its import.
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