Due to growing power demand, despite of taking effort to increase the coal production, the available coal production is insufficient to meet the power requirement. As a result, India has witnessed coal shortage issue recently and various efforts/directions has been given to the coal based generation stations, such as old units to be continued and not to be retired, Ministry of power directed coal based generating stations to use imported coal to meet the growing demand of power and allowed to pass through cost of imported coal allowed as per such directions.

Coal generating stations are facing issue of quality of coal, leading to affecting generation. Therefore, coal based generating stations are not able to generate at optimum level.

Presently, major coal based generating stations are purchasing coal from Coal India and its subsidiaries. Power generating companies are regulated under Electricity act and relevant tariff Regulations of the State Electricity Regulatory Commission. However, coal cost contributes the most in ARR of coal generating companies and being coal sector is unregulated sector, Coal generating companies don’t have any control on the coal cost. Availability of coal would help generating companies to generate the power and help to make fixed cost recovery which is linked to availability of plants. Further, growing power demand would create requirement of capacity addition of power generating plants.

On this backdrop, the client is in process of acquiring/own the captive coal block. In view of this, client is desired to assess the feasibility of using coal from captive block for the setting up of plant or for merchant sale of coal.

As a part of the engagement, Mercados has analysed the issue of shortage of coal in depth and assess the requirement of coal to meet the growing power demand. Accordingly, identified the potential off takers for coal by analysing their existing fuel supply arrangement and cost of coal. Also, assessed the additional thermal capacity required to meet the base load as per growing power demand. The insights enabled Client to instrument the possibility of using of coal from captive coal block for coal generating stations and any other alternative to supply coal from captive coal block. This has supported client in strategic decision making to set up coal based generating station using coal from captive coal.