* State miner could halt supplies to two NTPC plants
* NTPC says refused to pay full price for adulterated coal
* Coal India says could shut mine if row not resolved
* Dispute has delayed new supply contracts: NTPC
By Malini Menon and Matthias Williams
NEW DELHI, April 5 Miner Coal India
could halt eastern region supplies to the country's largest
power producer by the end of April, as a row over quality
between the two state-run giants escalated, raising fears of
The row underscores the difficulties India faces in
extracting coal quickly and efficiently enough to eliminate
power shortages that hurt economic growth, and to reduce its
reliance on costlier imports.
The head of Eastern Coalfields Limited (ECL), a subsidiary
of Coal India, the world's largest coal mining company, said on
Friday it could halt supplies to two plants of NTPC
after the latter stopped paying the full price for shipments.
Power producer NTPC has long complained it is forced to
accept coal that is heavily adulterated with rocks and stones
for its plants, hurting output and slowing the signing of new
An NTPC official, who did not want to be identified because
of the sensitivity of the matter, said the company had "taken a
stand" against its supplier, but added that it expected Coal
India to revolve the dispute soon.
R. Sinha, the chairman and managing director of ECL, said
the Coal India unit had been forced to cash in fixed deposits to
pay employees' salaries, to make up for the fact that NTPC's
non-payments amounted to 10 billion rupees ($182 million).
"We are open-minded. If NTPC resolves the issues, they can
get coal as they were getting. We can't keep coal at our pithead
because it will catch fire. So, we have to stop production if
they don't resolve the issues," he said.
"If this month again I have to encash some of the fixed
deposits, then I have to stop their coal supply, if they don't
pay us our dues," he added.
India sits on the world's fifth-largest coal reserves. But
state-controlled mining operations are riddled with corruption
and the theft of good quality coal by criminals colluding with
Coal India officials and police, a parliamentary panel said last
A massive blackout last July, when power was cut for two
consecutive days in a massive area home to 670 million people,
showed how far the country still has to travel in terms of
providing reliable power.
NTPC gets the bulk of its coal through long-term fuel supply
agreements (FSAs) with Coal India. The utility has delayed
signing a new supply pact for 4,500 MW, however, citing quality
issues, its chairman said in February.
ECL supplies coal from its Rajmahal mine in Jharkhand state
to NTPC's Kahalgaon and Farakka plants, and plans to expand the
mine's capacity to 17 million tonnes from 14 million tonnes
could be scuppered if NTPC does not pay its dues, Sinha said.
"We have taken a stand," an NTPC official said by telephone,
acknowledging the company had not paid in full for the coal
supplies but declining to give specifics.
"We've always had issues with supplies there," the official
said about coal shipments in India's east. ECL is headquartered
in the eastern state of West Bengal, where it has mines, as well
as in neighbouring Jharkhand.
"Coal India is also an equally responsible organisation. I
think they will very soon come up with a good plan," the
official said, without saying how a compromise could be reached.
Both coal supplier and power producer now jointly monitor
the quality of coal extracted from mines, opening up the
possibility of wrangles over its true worth. The government
plans to change that by mandating a third party to judge value.
Dipesh Dipu, a partner at Jenissi Management Consultants,
played down the chances of the dispute escalating to the point
where Coal India would pull the plug on supplies and cause mass
"I don't suspect it will lead to that kind of extreme
measures, because at the end of the day, both public sector
entity heads are responsible to their political bosses."
(Editing by Clarence Fernandez)