"NTPC to Source Coal from Commercial Mines on Delivered Basis"

In a strategic move, NTPC, India's largest power generator, will soon procure one million tonnes (mt) of thermal coal from commercial miners on a delivered basis. This new approach aims to create a reliable and cost-effective supply chain for coal, which is crucial for over 70% of India’s power generation.

The procurement plan, finalized last month, involves issuing a tender for the delivered coal. If successful, NTPC may source additional quantities from the private sector, potentially reducing the need for coal imports and alleviating pressure on Coal India Limited (CIL), the state-run coal behemoth.

Sources suggest that commercial miners are eager to participate, as it offers them a stable market while providing consumers with coal at competitive prices directly at the power plants. This arrangement could also alleviate the need for higher-priced coal acquired through e-auctions during peak demand seasons.

Coal Secretary Amrit Lal Meena had previously indicated that increasing coal contributions from both captive and commercial mines would improve coal availability, reduce auction premiums, and lower costs for consumers. This shift could ultimately lead to cheaper production costs for all coal-based industries.

If the NTPC initiative proves successful, it could reshape India's coal market by introducing competition and reducing CIL’s dominance, which currently accounts for nearly 90% of the country’s coal production. This change could impact fuel supply agreements (FSAs) and power purchase agreements (PPAs), offering power producers more options and potentially lowering fuel costs.

Siddartha Keshavadasu, Associate Director at Nangia & Co, noted that NTPC's move to diversify its coal sources represents a strategic effort to secure a more dependable and cost-effective fuel supply. By tapping into commercial mines, NTPC aims to lower coal costs, enhance power generation efficiency, and foster market competition, which could incentivize CIL to improve its practices.

HBL