NTPC to switch coal import mechanism - sources

NEW DELHI (Reuters) - India's biggest power producer, NTPC Ltd, has switched to linking coal imports with global indices, from an earlier fixed-price system, so as to gain from falling prices, government and company officials said on Tuesday.

Utilities in Asia's third-largest economy have stepped up coal imports in the current financial year to March 2009, to overcome a domestic shortage.

NTPC aims to import 8.25 million tonnes of coal this fiscal, compared to 2.5 million tonnes last year, with the bulk of this quantity yet to arrive.

In October, 56 thermal power stations had less than seven days' critical coal stocks, the Central Electricity Authority said on its website. Coal shortages forced NTPC to shut two units for a fortnight in July.

Thermal plants account for two-thirds of India's power generation capacity of 145.6 gigawatts, which lagged demand by 15 percent in September.

"Our board on Friday approved a formula for importing 8.25 million tonnes of coal this fiscal, linking the prices with the weighted average of international indices -- South African API-4 coal, the Newcastle index and the Barlow Jonker Index," a company official said, speaking on condition of anonymity.

A top government official also confirmed NTPC would import coal with linkages to its own formula, rather than fixed prices.

The NTPC official said the new formula was suggested by the State Trading Corp (STC), which will source the coal for NTPC.

In September, STC issued a tender to buy 8.25 million tonnes of coal, in which Singapore-based trader Adani emerged as the lowest bidder, quoting a price of $170-$180 a tonne. But since then the prices of 6,200-6,300 gross calorific value coal have fallen to as low as $100 a tonne.

"When STC opened the bid, the market price was high but soon after that, in 10 days or so, coal prices started moving downward," another NTPC official said.

"So in the national interest we asked STC to see and explore how the prices can be brought in sync with market...bring down the prices. Some shipments have already arrived but the bulk of the contracted quantity is yet to arrive," he said, adding that the firm would pay the prices according to its formula.

NTPC was formulating its own coal import policy, both company officials said.

In its global outlook, the International Energy Agency says coal's share of global energy demand will rise to 29 percent in 2030 from 26 percent in 2006, driven by booming power generation growth, chiefly in China and India.

Coal shortages have also forced state-run monopoly Coal India Ltd to turn to global markets for the first time.

Another state firm, MMTC Ltd, has floated a tender on behalf of CIL to buy up to 10 million tonnes of coal this fiscal year.

India's coal imports have risen from a few million tonnes in 2003 to a projected 50 million tonnes for 2009.

Government data released on Monday show Coal India Ltd and another state firm, Singareni Collieries Co Ltd, produced 37.3 million tonnes of coal in October against a target of 37.7 million.