Rajasthan electricity consumers pay more due to the state company’s coal deal with Adani Enterprises

Electricity consumers in Rajasthan are bearing the brunt of the state power corporation, Rajasthan Rajya Vidyut Utpadan Nigam Limited, or RRVUNL’s refusal to cancel a decade-old coal mining and delivery agreement with its private partner, Adani Enterprises Limited. In 2007, the two companies formed a joint venture called the Parsa Kanta Collieries Limited, or PKCL. PKCL mines the coal and sells it to RRVUNL. As a result of this agreement, RRVUNL is incurring an additional expense of Rs 600 per tonne of coal, according to an intervention application filed in the Supreme Court by Sudiep Shrivastava, a Chhattisgarh-based activist and advocate, in March 2018. The application states that based on an estimated coal production of 10 million tonne per annum, “RRVUNL is spending almost Rs 600 Crore extra to get its own coal.” To account for these expenses, RRVUNL passes on the excess cost to the distribution companies, who, in turn, pass it on to consumers in Rajasthan.

In March 2018, The Caravan reported that according to the RRVUNL’s documents, it was paying an excess of Rs 270 per tonne of coal delivered to the power plants, resulting in an estimated loss of over Rs 6,000 core over the 30-year lease period. However, Shrivastava’s application before the apex court estimated that the loss from PKCL’s overpricing of coal for the 30-year period amounted to an even higher sum of Rs 21,720 crore.

Shrivastava had filed his petition as part of an ongoing case in the court pertaining to what is known as the “Coalgate” scam. In 2014, in a landmark verdict connected with the Coalgate scam, the Supreme Court cancelled almost all the coal-blocks allocated to public sector companies. The court ruled that 214 out of the 218 coal block allocations since 1993 were illegal. It also found that private companies were benefitting from the coal-block allocations to public-sector undertakings because the prevailing joint ventures and mining agreements allowed the private companies to profit from mining coal allotted to the PSUs. The judgment nullified the joint ventures and mining agreements between the PSUs and private companies. Yet, RRVUNL continues its partnership with the AEL in violation of the apex court’s order.

In 2015, when the central government reallocated the coal mines, RRVUNL was allotted the Parsa East and Kanta Basan block in Chhattisgarh. The coal ministry had earlier allotted the block to RRVUNL in 2007; it was deallocated as per the Supreme Court order, and allotted again to the same company in 2015. Coal from the PEKB mine is being used for power production at units five and six of the Chhabra thermal power plant, units three and four of the Kalisindh power plant, and units seven and eight of the Suratgarh thermal power plant in Rajasthan. The state PSU could use coal from its allotted block to fuel its local power plants and provide electricity at lower rates than the prevailing price. But according to calculations by The Caravan based on publicly available data and Shrivastava’s estimates, consumers in Rajasthan are paying at least Rs 0.30 more per unit of electricity than what they would pay if the RRVUNL was buying coal at the standard notified price. The standard notified price is a benchmark price set by the coal ministry based on the grade of coal being bought.

Documents that the RRVUNL has filed with the Rajasthan Electricity Regulatory Commission—including preliminary information memorandums and tariff petitions—show that the power corporation is paying a higher amount than the notified price. Shrivastava also argues that the data disclosed in the PIM shows that RRVUNL is paying more than the Coal India Limited’s notified price. This is despite the fact that the RRVUNL should only be paying the mining charges, as the coal block has been allotted to the PSU.

In his intervention application, Shrivastava estimates that the cost of mining coal from the shallow coal seams of Parsa East and Kanta Basan is not more than Rs 300 per metric tonne. RRVUNL’s documents suggest that the company is paying five times the estimated cost of mining, and passing this on to consumers. The power corporation’s preliminary information memorandums for the disinvestment of two power plants in Rajasthan, at Chhabra and Kalisindh, published between 2015 and 2017, revealed that it is paying Rs 2,334 per tonne of coal. Excluding the royalty and other taxes, which amount to a sum of Rs 785, the cost paid for a metric tonne of coal is around Rs 1549—five times the estimated mining cost.

In its documents, RRVUNL has said that it is paying for coal of the gross calorific value, or GCV 4,900 kilocalories per kilogram. GCV is a measure of the heating capacity of a kilogram of coal, and varies according to the amount of moisture and non-coal substances present in it. However, according to Shrivastava’s petition, RRVUNL has been receiving a lower grade coal of GCV 4,000-4,300 kilocalories per kilogram which was priced at Rs 810 at the time of the publication of the PIMs. Based on this, he estimated that the final price of coal, including the royalty, taxes and freight charges, ought to be around Rs 3,000 per tonne. But according to the RRVUNL’s documents, it is paying Rs 3,969.5 per tonne of coal. Based on this pricing, RRVUNL has fixed the cost of electricity as Rs 2.08 per kilowatt hour.

According to Shrivastava’s petition, even by conservative estimates, the RRVUNL is paying at least Rs 600 extra per tonne of coal it buys from by the PKCL. If we deduct the excess cost of Rs 600 charged per tonne of coal, the cost of coal would reduce to Rs 3,369 per tonne. According to the RRVUNL, 0.52 kilograms of coal is required to produce one unit of power, or one kilowatt hour of electricity. After deducting the excess cost, the cost of electricity would come down to Rs 1.75—Rs 0.33 less than the current power tariff charged from consumers.

The Chhabra power plant has two units of 660 MW capacity, which generate at least 433 crore units of electricity each. The excess electricity charges from this plant amount to Rs 286 crore. Another Rs 260 crore is charged in excess at the two units of the Kalisindh power plant—both of which operate at a 600 MW capacity. Combined, these two power plants show an excess payment of around Rs 546 crore per year. The amount rises further if we include the two units of the Suratgarh power plant. This excess cost is passed on to three distribution companies—the Jaipur Vidyut Vitran Nigam Limited, the Ajmer Vidyut Vitran Nigam Limited and the Jodhpur Vidyut Vitran Nigam Limited—which distribute electricity to all 33 districts across Rajasthan.

I emailed RRVUNL, the AEL, the Rajasthan chief minister’s office, and the Rajasthan electricity department for comments. None had responded till the time this story was published. The story will be updated if they respond. Meanwhile, there is an alternative mining company available—a state-owned company called the Rajasthan State Mines and Minerals Limited which is equipped in the mining and beneficiation of lignite—or soft brown coal—which is mined using similar methods as that of coal. The company website describes it as a “global pioneer in technology in open cast mining.” Despite this, RRVUNL is incurring a loss of hundreds of crores of public money by outsourcing the mining process to a private company that is charging five-times the estimated cost of mining.

The Congress leader Ashok Gehlot and the Bharatiya Janata Party leader Vasundhara Raje have alternatively held power in Rajasthan since 2003, but both have ignored the violation of the Supreme Court judgment and the coal mining rules by the RRVUNL and the AEL. It has been over four months since the new Congress government, headed by Gehlot, came to power in Rajasthan, but the state government has not yet taken any action to look into the irregularities in mining operations of the state’s PSU.