NTPC wants to trim coal imports - chairman

Locals carry coal from an open cast coal field at Dhanbad district in Jharkhand September 20, 2012.

NEW DELHI (Reuters) - India's largest power producer, NTPC (NTPC.NS), wants to reduce its coal imports from 10 percent of its annual fuel requirement to keep production costs under check, its chairman said.

The 40,000 megawatt thermal power producer has a coal requirement of 164 million tonnes in the current fiscal year to end-March and has already contracted to import 16.4 million tonnes of coal, a third more than the 2011/12 fiscal year.

"Ten percent of all our requirement is now being imported, but we would like to reduce it. It increases the costs. It doesn't help the country," Arup Roy Choudhury, who is also the managing director of the state-run utility, said in an interview on Friday.

Imported coal costs almost 50 percent more than the equivalent local coal supplied by state-run miner Coal India Limited (COAL.NS), which produces nearly 80 percent of the domestic coal supply.

About 70 percent of power generated in India is from burning coal.

Choudhury said his hopes of trimming imports hinge on the availability of more domestic supplies in the next few years from Coal India and private players as well as from the captive coal blocks allocated to the utility.

"We are expecting Coal India to increase its production. We are expecting other people (private producers) to come in," he said, on the sidelines of the fifth India Energy Congress conference in New Delhi.

"The (captive) blocks that we have will give out 40 million tonnes by the end of (March) 2017. But by that time, our demand requirement will be 200 million tonnes of coal. So we get still only 20 percent of what we require from the mines that we have."

NTPC aims to increase its capacity to 51,052 MW by end-March 2017.

NTPC obtains the bulk of its coal through long-term fuel supply agreements (FSAs) with Coal India. The utility has delayed signing a new supply contract for 4,500 MW with the miner, however, citing quality issues.

"There are certain issues which we are sorting out with Coal India. Of 40,000 MW, only 4,500 MW is the new FSA. The rest are working on the old FSA," Choudhury said.

India has about 118 billion tonnes of coal that could be mined but manages to produce only about 600 million tonnes annually, he said.

Coal India, the world's largest coal miner, is under pressure from the government and power producers to ease fuel shortages at home but has struggled for years to raise output due to problems in obtaining environmental and regulatory approval.

"In the last five years, the CAGR (compound annual growth rate) of India's power sector has been close to 10 percent, while that of Coal India has been minus 1," Choudhury told the conference.

(Editing by Jane Baird)