January 11, 2009

Govt pays extra for coals extracted from its own mines

Kolkata,10 January: The West Bengal government is paying 134 per cent extra on coal extracted from its own mines, which has resulted into a higher cost of power supply in the state. Instead of retaining the mine rights of Tara East and Tara West blocks of coal mines that the Centre had given to the state government in 1996, the latter chose to rope in Eastern Mineral and Trading Agency (EMTA), which formed a joint venture company, Bengal EMTA Coal Mines Ltd, with the state-owned West Bengal Power Development Corporation (WBPDCL) and Durgapur Projects Ltd (DPL).

The decision has come at a hefty loss as the government is losing Rs 530 for each tonne of coal it is supplies to Bakreswar Thermal Power Project. The only consolation is the 15 per cent dividend from the net profit that EMTA gives to its state-owned partners — WBPDCL and DPL. According to an agreement between the state government and the EMTA, the WBPDCL buys coal at a price which is 19.5 per cent less than that of Coal India Limited (CIL) notified price. At present, the notified price of the CIL coal is Rs 1,100 per tonne. So, the price of the EMTA coal works out to be nearly Rs 880 per tonne.

But herein lies the rub. Had the government retained the exclusive rights on the mines and opted for contract mining, the cost of coal, including transportation charges, would not have been more than Rs 350 per tonne at present rates. According to WBPDCL Chairman S Mahapatra, cost of coal accounts for nearly 70 per cent of the total power generation cost. He added the total requirement of the state-owned power generation company is nearly 20 million tonne a year, of which 4 million tonne comes from the Bengal EMTA. Had WBDCL been in a position to acquire this 4 million tonne at Rs 350 per tonne, it would have inevitably lowered the power generation cost, which at present is Rs 2 and translates to Rs 3.35 when distribution cost is added.

State power secretary Sunil Mitra said the government has been thinking of fixing a new rate, but at the same time admitted that the process has not been initiated as yet. According to Mitra, the current price reflects the investments EMTA has made for acquiring the mines, prospecting the blocks, giving relief and creating transport infrastructure. EMTA insiders said the company, still unlisted, had never been clear with its financials, although it has huge plans in power business.

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