NTPC Planning to Enter Coal Mining Business

India’s largest power producer, NTPC Limited, was planning to enter the coal-mining industry, with the aim of producing coal from captive domestic mines, as well as forming plans to acquire overseas coal assets.

According to an official in the Power Ministry, NTPC’s entry into the coal mining market was strategic – to source 100-million tonnes a year of coal from ten captive mines, and to gain more efficient raw material security for thermal power generation and partially reduce dependency on Coal India Limited (CIL).

A mining division was part of the company’s $1.5-billion plan over the next three years to bring down merchant import coal dependency from 21% to 10% through a combination of developing captive mines and acquiring a stake in overseas coal assets.

NTPC was currently able to secure 95% of its feedstock requirements from CIL but this would be pruned to 90% and even lower, to 80%, in the case of supplies for the power projects implemented after March 2009, under new fuel supply agreements between the two companies.

NTPC, with an installed capacity of 40 000 MW, requires around 164-million tonnes a year of coal.

The official said that with NTPC also planning to acquire equity stakes in overseas coal assets, the proposed mining division would be important to offer technical and managerial support, as several of the targeted assets were underdeveloped.

The power utility has appointed mine developer operators for the few captive coal reserves allocated to it, but the thinking within the Power Ministry was that extending NTPC’s know-how to mining – it already has senior management expertise in feedstock supplies, transportation and logistics – would enable the company access to more efficient raw material linkages and stronger relations with principal overseas asset owners, the official said.

Plans for mining operations were also given a boost when NTPC recently secured more captive coal blocks, including four blocks with an estimated reserves of two-billion tonnes.

Of the captive blocks previously allotted to NTPC, the company had secured environment and forest clearances for four.