Power companies to save Rs 2,500 cr/yr as coal linkage rationalization expands

The amount of money estimated to be saved by power companies in India due to the rearrangement of coal supplies has risen to Rs 2,503.50 cr per year, according to power ministry sources.

The program of swapping coal sources, known as ‘coal linkage rationalization’, is in its third phase.

The first phase, which was carried out in 2015 and involved Coal India’s fuel supply to 17 power plants, had saved Rs 913 cr per year in moving costs.

Subsequently, Phase II saved 458 cr, taking the total to Rs 1,371 crore per year in transportation costs. The third phase involves a cluster-wise swapping of sources.

As of February, total savings achieved are to the tune of Rs 2,503.5 cr (25 bln) and the total quantum of coal involved in the swaps is 40.54 million tonnes per year.

Coal is primarily transported via rail in India and costs around Rs 1,400 per ton to move per 1,000 km. Given that the projected savings per ton is Rs 617, the coal being swapped under the program was being by around 400 km on average.

For example, 1 million tonnes of the fuel supply was swapped between NTPC Ltd and Gujarat State Electricity Corporation Ltd. The GSEC supply, which originated in Madhya Pradesh, was diverted to NTPC’s nearby thermal power plant in Seepat, while NTPC diverted an equivalent quantity of coal imported via Gujarat ports to the GSEC.

Similarly, another 1.2 million tonnes of annual supply to GSEC was handed over to the Western Coalfields Ltd — a unit of Coal India — from South Eastern Coalfields Ltd.