NTPC incurred Rs 6,870-crore loss in coal purchase: CAG

An audit report by the Comptroller and the Auditor General of India (CAG), tabled in Parliament on Friday, indicated structural fuel management inefficiencies at coal-based power plants of NTPC. This resulted in increased fuel cost of power stations and cost of energy to consumers. The auditor said that through its 13 specified power stations, NTPC incurred additional expenditure of Rs 6,869.95 crore over 2010-16 in procurement of domestic coal itself.

Additionally, according to CAG, it failed to generate revenue of Rs 4,299.8 crore due to coal shortage at its stations. NTPC buys coal domestically through long-term coal linkages from subsidiary companies of Coal India and Singareni Collieries Co at notified rates. However, rates are higher for buying through memoranda of understanding, e-auction and import.

NTPC had to procure coal at higher than stipulated rates due to inadequate coal linkages, delay in signing of fuel supply agreements (FSAs) and shortfall in supplies. The report noted that the company had no comprehensive policy on coal import, though it has been importing coal since 2005-06, resulting in anomaly.

Delays in FSA-signings itself cost the company Rs 323.37 crore. There was a total impact of Rs 1,440.33 crore from the lack of a standard mechanism to evaluate the quality of coal, the CAG report said. Rs 129.67 crore had to be paid to Indian Railways within the audit period, just because coal was not unloaded within the stipulated time from the railway rakes.

The report pointed out several problems such as the lack of a mechanism for proper coal storage, weighing and stock reporting, among others. The central auditor also said that the company could have saved Rs 1,440.33 crore if it had followed the proper methodology to measure coal quality.

To overcome the inefficiencies in fuel management, CAG recommended that the largest power-generating utility in the country may review the procedures for procurement of coal above notified rates. It should also formulate a standard policy on coal imports. It also suggested that the power ministry should consult with the Central Electricity Regulatory Commission to come up with a standard method of coal-quality assessment.

It also advised the power ministry to review the terms of FSAs with the coal ministry and Coal India to safeguard the intra-year shortfall in deliveries and comply with the new coal distribution policy.