Power Crisis In Tamil Nadu Result Of Poor Planning, Delayed Imported Coal Tender By State Electricity Utility: Report

Tamil Nadu’s prevalent power shortage is triggered by alleged complacency on part of the state’s power generation and distribution utility, reports Moneycontrol.

On 22 April, Chief Minister (CM) MK Stalin, under fire from opposition and consumers, wrote a letter to Prime Minister (PM) Narendra Modi and blamed the existing power shortage situation in the state on the Indian Railways.

“Coal production is sufficient to meet the increased summer demand for power, the same is not getting transported to ports due to short supply of rakes by Railways,” Staline said in the letter, as reported by Moneycontrol.

However, shortfall of railway rakes is reportedly a perennial problem.

To circumvent the problem, the Tamil Nadu Generation and Distribution Corporation Limited (TANGEDCO) came up with a process that would ensure adequate coal supply during the 2011-2016 regime of late chief minister J Jayalalithaa.

As the domestic supply is only around 50,000 metric tonne (MT) against the requirement of 72,000 MT, Tamil Nadu needs to import coal to offest the shortage.

The state-run power plants use a blend - 30 per cent imported coal mixed with 70 per cent domestic coal.

The TANGEDCO issues a tender to import coal from Indonesia latest by February every year.

This year, the tender was rolled out only on 26 March, which is nearly a two-month delay as compared to the usual norm.

In some years, if global coal prices are volatile, tenders are issued as early as in November for next year’s supply, as reported by Moneycontrol.

“Coal is expensive in international markets and the prices were very high. Instead of going for one large tender, as the price is fluctuating, we will go for many small tenders, at least one every quarter. This is because price trends are not predictable,” a senior TANGEDCO official was quoted in the report as saying.

The process of issuing a tender to receipt of coal takes around one-and-a-half to three months. Hence, the delay in releasing the tender this time has likely contributed to the current power crisis.

“Calling for tenders for imported coal in end-March is late,” a former top executive of TANGEDCO was quoted in the report.

“It has nothing to do with cash flow as payment to importers is always on credit, not in advance. But yes, given the current situation with international coal prices going through the roof, it will be far costlier than domestic coal. Of course, it may have been cheaper had tenders been called for and settled last year itself," the ex-TANGEDCO executive said.

“One needs to build up your domestic coal stock to 10-15 days during winter months, enter into short-term contracts for March to May well in advance in November and likewise, call for imported coal tenders during November by the latest and settle the contract latest by January. It would appear that the present crisis is the result of poor planning,” he added.

The summer demand peaks at around 15000-16000 MW and TANGEDCO usually has to plan ahead as it is already dealing with debt close to Rs 1.34 lakh crore.