The recent power outages across the country due to an artificial shortage of coal stocks in thermal plants have led the central government to restart an old practice of blending domestic coal with imported coal. This has been raised by the All India Power Engineers’ Federation (AIPEF), in a letter to the union power minister R.K. Singh, as a move that will raise consumption costs of electricity.

In the letter dated October 28, VK Gupta, spokesperson of the Federation, argued that the decision to allow blending of up to 15% of imported coal with domestic stocks in case of shortages was a short-sighted measure.

Providing an example, Gupta mentioned that the ‘landed cost’ of Indian coal bought by a thermal station in Punjab was Rs. 5,510 per tonne, whereas a tonne of imported coal would cost the station no less than Rs. 22,000 per tonne. This, the Federation’s letter claimed, would in turn raise the per-unit costs from Rs. 3.22 to Rs. 4.37. State distribution companies, already reeling under financial crunches, would then be in no position to bear such a dramatic rise in raw material costs.

Gupta further added that private generators, on the other hand, were not covered under the CAG audit, and could indulgent in fraudulent practices and raise tariffs. He reminded the union minister that the Directorate of Revenue Intelligence was currently investigating the forging of documents by independent power producers, such as Adani, and that this was awaiting a judgement from the Supreme Court of India.

This move by the power ministry comes at a time when global prices of coal have jumped. Naturally, import costs too would climb, further exacerbating per-unit electricity costs.

Another factor that aggravates the situation is the stagnation of domestic coal production in the past three years, Gupta highlighted in the letter. Such production-level policy decisions create a cycle where options like the blending of coal have to be considered. In contrast, as an ET report noted, the practice of blending coal was abandoned 4-5 years ago because ample stocks of domestic coal stocks were present.

The AIPEF letter has urged the central government to take steps to increase coal production, and ensure that the logistics of transporting coal be put into motion before the monsoon takes hold of the country next year.