Nokia, Ford Demand Prompts Tamil Nadu State to Add Coal-Fired Power Plant

Electricity demand from investors such as Ford Motor Co., Hyundai Motor Co. and Nokia OYJ may boost coal demand in India as Tamil Nadu, the biggest wind power generator in the country, adds new coal-fired units.

The Tamil Nadu Electricity Board may add three units of 600 megawatts each this year, which will boost the state utility’s coal consumption by about 9 million metric tons, said J.P.S. Amarnath, chief engineer for coal. The utility, which consumes 15 million tons annually, imports about 2 million tons.

“We are currently importing coal from Indonesia,” Amarnath said in an interview in Chennai. “We have tie-ups with Coal India to meet our additional needs.” The supply agreements may run as long as two decades and carry penalties for non- delivery, he said.

Tamil Nadu, India’s second-most industrialized state, plans to add 8,000 megawatts over the next four years to ease blackouts and power cuts of 6-9 hours a day, according to the state utility. Most of the additional capacity will be coal- fired, said C.P. Singh, the head of the utility, in Chennai. Hyundai, Ford and Nokia are among international companies to establish factories outside Chennai, the capital of Tamil Nadu.

Domestic coal will be harder to procure as new mines, which are yet to be developed to meet growing demand, are located in “troubled” areas in Chattisgarh and Jharkhand, said S. Narayan, president of Centre for Asia Studies and a former bureaucrat who oversaw coal policy. Both states are witnessing armed conflict between Maoist rebels and the government.

Domestic Supplies

The state utility may keep coal imports unchanged as it’s confident of securing domestic coal from Coal India Ltd., which is of lower heating value compared to the imported variety, Amarnath said.

The turbines used in their power plants are compatible with domestic coal, which has a 4,000 gross calorific value. Better grades of imported steaming coal from Australia, South Africa and Indonesia whose heating value is more than 5,000 can only be used when blended with the domestic variety, he said.

Unlike utilities in neighboring Karnataka and Maharashtra states, the Tamil Nadu utility secures its imports through state MMTC Ltd., he said.

Power-station coal prices at Newcastle, an Asian benchmark, increased 1.9 percent last week, the globalCOAL NEWC Index shows. Prices rose to $100.18 a ton from $98.28 in the week to April 23.

India, the world’s second-most populous nation, will import 76 million tons of thermal coal and coking coal for steel-making in the 2010 fiscal year, according to mjunction Services Ltd., a Web-based trader backed by the country’s biggest steel producers, in January. That’s up from 59 million tons in the previous period. Imports will rise to 110 million tons in 2012.

To contact the reporter on this story: Dinakar Sethuraman in Singapore at dinakar@bloomberg.net.

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