One of the major challenges that the firm is currently facing is the procurement of raw material – coal. There are three different ways to fulfill the coal requirement viz. Domestic coal, International Coal and Blended.
Domestic coals are of the inferior grade and cheap, about $26 per ton . In the last five years, the supply has been volatile. On the contrary, international coal has had a constant supply, high grade quality but higher prices ($55 - $92 per ton ) with volatility. Also, procuring international coal involves added freight costs and transportation time as compared to domestic supply that are usually situated close to the power plants. For every 10 per cent of imported coal, the cost of power generation goes up by 30 paisa a unit …show more content…
Thus, Tata Power gets most of its demand fulfilled from the international supply via Indonesian coal mines. To get a competitive advantage and procure international coal at lower process compared to other players, TATA power had signed contracts with Indonesia for the supply of coal from Indonesian mines through tariff bidding. Its current Indonesian presence involves 30% equity stakes in two major Indonesian thermal coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia, and a related trading company owned by PT Bumi Resources …show more content…
This could reduce transportation costs by up to 15% and therefore improve profits. But this might imply longer transport times. NTPC currently transports 3 million ton of coal a year through the inland waterway to the Farakka station .
Acquire domestic mines - To reduce gradually the dependence on imported coal, we suggest Tata Power acquire more number of domestic coal mines. This would effectively lead to a reduction in costs because for every 10 per cent of imported coal, the cost of power generation goes up by 30 paisa a unit.
4.2.3 LIMITATION OF PROPOSED SOLUTION
Blending and pooling of coal procurement are useful, but it comes at a cost. Even if the blended coal closely resembles the design coal for the boiler, the blend need not perform the same way . A limitation to blending coals is the compatibility of the coals themselves, and problems are more likely when blending happens in petrographically different coals .
The principal disadvantage of using inland water transport for coal is that rivers levels may change seasonally and freez may occur in winter causing stoppages in navigation . Also, waterways are less flexible than either roads or railways that can more easily adapt themselves to changing industrial location .
5.
Domestic coals are of the inferior grade and cheap, about $26 per ton . In the last five years, the supply has been volatile. On the contrary, international coal has had a constant supply, high grade quality but higher prices ($55 - $92 per ton ) with volatility. Also, procuring international coal involves added freight costs and transportation time as compared to domestic supply that are usually situated close to the power plants. For every 10 per cent of imported coal, the cost of power generation goes up by 30 paisa a unit …show more content…
Thus, Tata Power gets most of its demand fulfilled from the international supply via Indonesian coal mines. To get a competitive advantage and procure international coal at lower process compared to other players, TATA power had signed contracts with Indonesia for the supply of coal from Indonesian mines through tariff bidding. Its current Indonesian presence involves 30% equity stakes in two major Indonesian thermal coal producers, PT Kaltim Prima Coal and PT Arutmin Indonesia, and a related trading company owned by PT Bumi Resources …show more content…
This could reduce transportation costs by up to 15% and therefore improve profits. But this might imply longer transport times. NTPC currently transports 3 million ton of coal a year through the inland waterway to the Farakka station .
Acquire domestic mines - To reduce gradually the dependence on imported coal, we suggest Tata Power acquire more number of domestic coal mines. This would effectively lead to a reduction in costs because for every 10 per cent of imported coal, the cost of power generation goes up by 30 paisa a unit.
4.2.3 LIMITATION OF PROPOSED SOLUTION
Blending and pooling of coal procurement are useful, but it comes at a cost. Even if the blended coal closely resembles the design coal for the boiler, the blend need not perform the same way . A limitation to blending coals is the compatibility of the coals themselves, and problems are more likely when blending happens in petrographically different coals .
The principal disadvantage of using inland water transport for coal is that rivers levels may change seasonally and freez may occur in winter causing stoppages in navigation . Also, waterways are less flexible than either roads or railways that can more easily adapt themselves to changing industrial location .
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