Modi's coal turnaround to ease India's chronic power cuts

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Fewer power cuts are likely in India this summer after a surge in output at Coal India helped generators amass record stocks, a turnaround for Narendra Modi who had to battle a power crisis within months of becoming prime minister last May.

Fast-track mine approvals, tighter production oversight and more flexibility in coal sales have helped power station stocks recover from a six-year low hit in October, vindicating Modi's pitch to voters as the state leader who brought round-the-clock power to industrial Gujarat.

As Modi prepares to mark his first year in office and seeks to fulfil a poll promise to provide power to all of India's 1.2 billion people by 2019, power stations hold 28 million tonnes of coal, a 38 percent jump from a year ago, government data shows.

"The situation is improving," said K. Raja Gopal, head of the thermal power business at construction, power and real estate conglomerate Lanco Infratech, pointing to recent growth in Coal India output. "More needs to be done but 8 to 9 percent didn't happen before."

The biggest threat to coal

India, the world's third-largest coal buyer, is expected to cut imports by a fifth in the fiscal year to March 31 from an estimated 200 million tonnes in the previous year. Power companies have relied on imports for 15 percent of their coal needs.

India suffered one of its worst blackouts in 2012 due to a shortage of coal plus outdated transmission lines and an over-burdened grid. Power shortages shaved 0.4 percent off GDP in 2012/13, industry body FICCI estimates.

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Coal stocks fell to zero at New Delhi's Badarpur power station last October but now there is enough to last 43 days going into the peak demand season. The situation is similar at many other power plants across India, where over 60 percent of electricity is generated by coal.

State-controlled Coal India also holds pit-head stocks of 53 million tonnes that can be shipped before the four-month monsoon season starting in June, a company source said.

The company's output rose 32 million tonnes to 494.2 million tons in 2014/15, the biggest volume rise in its four-decade history, Chairman Sutirtha Bhattacharya told Reuters. Output is expected to jump to 550 million tonnes in 2015/16 and 1 billion tonnes by 2019/20.

The revival has been spearheaded by Piyush Goyal, an accountant and investment banker picked by Modi to run a power and coal super-ministry with a remit extending from the coal face to household power supplies.

Open at last

Barely a month into his job, Goyal pushed Coal India to open a long-ready but remote mine in the first big launch in five years.

Operations at the Amrapali mine in the eastern state of Jharkhand were delayed for almost a decade by the lack of a railway link to take coal away.

Now, for the first time in the company's history, Coal India has allowed power companies to pick up coal directly from the mine by truck without signing any long-term fuel supply agreement.

Coal India opened three more big mines last fiscal year and expanded others. The government, meanwhile, set up a website to track mine progress to keep Coal India's bosses on their toes.

But the company will have to deploy technology to improve abysmal efficiency, and private companies will have to follow up on the government's invitation to mine and sell coal, to meet the ambitious goal of doubling production in five years.

India has launched a round of auctions of mines so that private firms can extract coal for their own use, after the Supreme Court last August cancelled more than 200 illegal coal block awards made over two decades.