Mystery of the missing coal

Recent revelations by the Electricity Minister that several lakh tonnes of coal had gone missing from power plants in Chennai, Mettur and Thoothukudi have sent shocks across the state. How does so much coal go missing? Whoddunit?

Electricity Minister V. Senthilbalaji’s statement last week on 2.38 lakh tonnes of coal, valued at ₹85 crore, going missing from the Tamil Nadu Generation and Distribution Corporation Limited’s (Tangedco) North Chennai power plant and hinting about similar issues in the Mettur and Tuticorin thermal stations has raised quite a few eyebrows.

Sources in the Tangedco said the issue actually first came to light when a senior official brought it to the notice of the then Chairman and Managing Director Pankaj Kumar Bansal about “coal shortage” in the Tuticorin thermal power station. Immediately, a committee was formed to inspect all thermal power stations and prepare a report of the coal loss. But the committee did not take any steps due to the coming Assembly election in the State, they added.

With the DMK government assuming power three months ago, the Electricity Minister and current Tangedco chief Rajesh Lakhoni convened a meeting of the committee members and asked them to prepare an initial report. The report contained information on the missing coal, sources said.

Mr. Senthilbalaji has accused the previous AIADMK government of mismanagement, and has ordered an investigation.

Speaking to The Hindu, former Electricity Minister and AIADMK leader P. Thangamani claimed the “shortage” of coal was identified during August 2020 when he went to New Delhi to meet the Union Power Minister regarding the augmentation of coal supply to the State. He said when he was notified of the difference between the coal stock shown and actual available coal, he ordered an inquiry and formed a committee.

“Unfortunately, the COVID-19 pandemic intensified and I became involved with party work for the Assembly election, so the issue could not be pursued further,” Mr. Thangamani added.

Denying any wrongdoing, he said he was willing to face any inquiry. Mr. Thangamani also added that the shortage could have been owing to a technical error, and not manual sabotage.

As of now, the missing coal issue raises more questions than there are answers available, but let us focus the spotlight on the way Tangedco manages its coal requirements.

Assembly line

Coal, which is used as the primary fuel at thermal power stations, accounted for 95.54%-98.41% of the total cost of generation of Tangedco during 2014-19, according to a report of the Comptroller and Auditor General of India (CAG) on public sector undertakings in Tamil Nadu for the year ended March 31, 2019.

Tangedco meets its coal requirement through indigenous coal as well as imported coal. The indigenous coal is sourced from four subsidiaries of Coal India and Singareni Collieries Company Limited. Imported coal is being procured mainly from Indonesia. The indigenous and imported coal are blended and used in thermal power stations.

From the mines, the coal is transported through ports. Further, the stock is routed to the power plants through the Railways and conveyor systems.

The efficiency of a power plant is determined by the quality of coal used which, in turn, is measured in terms of calorific value expressed in kilocalories per kilogram (kcal/kg).

“This [missing coal] does not seem to be a direct theft of physical coal from the plant. This has got to do with the quality of coal. Imported coal needs to have 6,000 kcal/kg as per tenders, but only 4,500 kcal/kg of poor quality coal come in reality,” Jayaram Venkatesan, convener, Arappor Iyakkam, pointed out.

Due to this, the plant has to use additional load to achieve the same power output as it would have realised with 6,000 kcal. However, in order to cover up the corruption in the quality of coal, the additional loads used are not recorded. Recording it would show more tonnes used per MW of electricity generated, which will indicate lower efficiency and questions about coal quality. Therefore, the stock is used but not shown, he explained.

In 2018, Arappor Iyakkam alleged a major scam in coal procurement and lodged a complaint with the Directorate of Vigilance and Anti-Corruption. A former Tangedco official blamed the supplier Coal India for the stock loss issue.

“Normally, Coal India would bill for high quality coal but supply only low quality coal. Moreover, all these years Tangedco has never bothered to take into consideration the loss that happens during transit,” he pointed out. The retired official said that during transit, either through rail or ship, 5%-6% of loss would occur.

The transit loss would naturally bring down the calorific value of the coal, resulting in the downgrading of the efficiency factor. However, the transit loss was not accounted for in quantity or financial terms. The managers had not taken this to the notice of senior officials, he added. The former official also said coal transporters would remain silent about it, as they need to compensate for the reduced quantity.

K.E. Raghunathan, convener of the Consortium of Indian Associations, said the key thing to watch out for is whether there was a system to verify the physical stocks with those in the books and whether a periodic audit was done. “If there is no system in place, that should be fixed first,” he added.

Lapses in management

Interestingly, the CAG report, tabled in the Assembly on June 24, 2021, has dealt with the aspect of coal management in the thermal power stations of Tangedco and pointed out a slew of lapses.

The audit observed that Tangedco did not record the shortage of coal from the collieries to the load ports.

“There was no provision for periodical assessment of coal shortages and recovery thereof. As a result of this, coal shortages occurring during the past 18 years (2001-19) have not been recorded. Thereby, the Tangedco was unable to assess the shortage of coal,” it added.

Tangedco should ensure that coal shortages are recorded at regular intervals and recoveries effected before the closure of contracts to protect financial interest. Tangedco may prioritise the reconciliation of transit loss as it was pending for over 19 years, the CAG said.

It also pointed out that Tangedco had not documented or created any logbook for witnessing and recording weighing of coal at mines. For instance, the audit report pointed out that coal unloaded from ships at discharge ports in Ennore and Thoothukudi are accounted on the basis of draft survey reports, without cross-verifying the actual quantity delivered at the coal yard.

A draft survey is a calculation of the weight of cargo loaded to or unloaded from a ship from the measurements of changes in its displacement. The technique is based on Archimedes’ principle, it said.

The audit pointed out that V.O.C. Port Trust in Thoothukudi estimated a coal spillage of 12,000 tonnes into the sea during unloading during 2015-19. However, this shortage was not reflected in Tangedco’s books of accounts.

The Tamil Nadu government in its reply (September/October 2020) stated that there was no provision in the CAG’s audit report and also observed that Tangedco had no separate ‘quality assurance wing’ to cover the entire gamut of coal quality activities. Quality issues are dealt with by only one official, indicating lack of monitoring of procurement activities valuing above ₹4,000 crore per annum.

A sample survey in the audit report, conducted among Tangedco personnel, showed most of them were not aware of how much kilograms of coal should be collected from each wagon for sampling. They were not aware of the relevant BIS procedure applicable for sample collection and testing, it added.

The then State government stated that to rectify the infirmities pointed out, formation of a separate Coal Quality Monitoring Wing was under scrutiny, the CAG said.

It also pointed out as against the normative loss of calorific value of 120 kcal/kg, the actual loss during transportation ranged between 140 and 2,256 kcal/kg, resulting in wasteful expenditure of ₹2,012.65 crore. Even though there were instances of a drop in gross calorific value (GCV) during consumption immediately upon its receipt on the same day, Tangedco had not analysed the reasons for the same, the CAG said.

Further, it said operational efficiency of thermal power stations was regulated through station heat rate, which depended on the quantity and quality of coal. Station heat rate is measured in terms of quantity of coal multiplied by the GCV and divided by number of units of energy generated.

The actual station heat rate was in excess of the norm stipulated by the Tamil Nadu Electricity Regulatory Commission in all thermal power stations (excluding the Mettur power station I in 2015-16 and the Mettur power station II from 2016-17 to 2018-19), the report said. This resulted in excess consumption of coal of 56.85 lakh tonnes, valuing ₹2,317.16 crore throughout 2014-19, it added.

The CAG also noted that Tangedco could not reduce specific coal consumption, despite usage of higher proportion of imported coal, having high calorific value, at all thermal power stations. The State government, in its reply, had said the station heat rate could not be achieved owing to the ageing of the power plants, receipt of poor quality of coal and non-operation of plant at full capacity due to load restrictions. However, the CAG said the reply was not convincing because the norm was fixed only after these factors were taken into account.

The CAG also pointed out that specific coal consumption, which reflects coal used to produce one unit of energy, remained the same in all thermal stations for all 60 months during 2014-19, irrespective of whether imported coal was blended to a lesser or greater extent.

Specific coal consumption did not improve despite blending higher gross calorific value imported coal in thermal power stations, and this was indicative of other operational deficiencies, which need to be analysed by Tangedco, as it continued to incur higher cost for procuring imported coal, the CAG said.

Coal and power generation

In the revised Budget for 2021-22, the Tamil Nadu government said the installed capacity of Tangedco’s own existing thermal power plants was only 4,320 MW. Out of it, 12 units, generating 2,520 MW, were more than 25 years old and need to be replaced soon.

A total of 17,980 MW of power generation capacity would be added through own generating stations in the next 10 years, the Budget said. It also said the aggregate installed power generation capacity in Tamil Nadu is 32,646 MW, including wind and solar capacity of 13,128 MW.

However, the Budget pointed out that the actual maximum availability of power during peak requirement was only 14,351 MW against the peak demand of 16,846 MW. The main reason was stated to be that wind energy was seasonal and solar energy was available only during the day.

Almost 2,500 MW of power had to be bought on the power exchanges to meet the peak needs. Thus, the statement that Tamil Nadu turned a power surplus State over the last few years was inaccurate, it added. One of the key aspects to ensure uninterrupted power generation was ensuring adequate supply of quality coal.

For instance, the CAG said actual generation at Tangedco’s thermal power stations during the five years from 2014-15 to 2018-19, was 26,980 million units (MU) lower than what was targeted, mainly owing to the shortage and poor quality of coal.

While only an investigation would bring out the actual reason for the missing coal, there are many shortcomings in coal management by Tangedco. Given the State government’s ambitious capacity addition target, how it fixes the issues in coal management would be closely watched.

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