g-4 amtm project_jaypee business school

8/8/2019 G-4 AMTM Project_Jaypee Business School

1/23

Jaypee Business School

A constituent of Jaypee Institute of Information Technology University

A-10, Sector 62, Noida (UP) India 201 307

Air and Maritime Transport Management

Project On

Logistics management of Air / Maritime cargo for

a NTPC Ltd. of POWER sector

Submitted To: Submitted By:

Dr.SudhirKapur&Mr. T.K. Sengupta RohitRanjan 06502907

Md. Sharik Ahmad 06502912

MukulGoyal 06502925

AbhashGoel 06502926

Nitin Gupta 06502928


2/23

Chapter 1: Introduction

When India became independent in 1947, the country had a power generating capacity of

1,362 MW.Power was available only in a few urban centers; rural areas and villages did not

have electricity.

After 1947, all new power generation, transmission and distribution in the rural sector and the

urban centers (which was not served by private utilities) came under the purview of State and

Central government agencies. State Electricity Boards (SEBs) were formed in all the states.

National Thermal Power Corporation (NTPC), National Hydro-electric Power Corporation

(NHPC) and Power Grid Corporation Limited (PGCL) were formed by the government to

assist in meeting the increasing demand for electricity throughout the country.

The country has gone a long way from installed capacity of merely 1862MW at the time of

independence to present level of over 121000MW, from 1500 villages electrified to 4,75,000

villages, from 2700ckm transmission lines to 2,70,000ckm, from 15KWH per capita

consumption to 600KWH.

Power sector is the key to the growth of other sectors because without uninterrupted quality

of power supply it is difficult for any other sector to operate or survive. 70% of the countrys

economy is agriculture based. It is here that the power sector contributes by providing powersupply to the farmers, at subsidized rate. However, this has resulted in huge losses to SEBs,

which is in shambles and are unable to pay for the power they buy from the Central Power

sector. The farmers should be provided with uninterrupted quality power as in the case of

industry. However, the subsidies or lower tariff paid by the agriculture should not be at the

cost of SEB's, which in turn go in for debts and are unable to pay on month-to-month basis.

Leading companies in the power sector in India and World:

Allegheny Energy: It is an investor-owned electric utility headquartered in Greensburg,

Pennsylvania. It consists of transmission and distribution

operations serving 1.6 million customers, primarily in

small towns and rural areas.


3/23

Dominion Resources Inc. : It is a power and energy company headquartered in Richmond,

Virginia that supplies electricity in parts of Virginia

and North Carolina The company's asset portfolio

includes 27,000 megawatts of power generation,

6,000 miles (9,700 km) of electric transmission lines, 14,000 miles (23,000 km) of natural

gas transmission, gathering and storage pipeline, and 1.2 trillion cubic feet equivalent (Tcfe)

of natural gas and oil reserves

Reliance Infrastructure - ADA Group: Its India's largest private sector enterprise in power

utility. In the power sector Reliance are involved in

generation, transmission, distribution and trading of

electricity and constructing power plants as EPC

partners. Reliance Infrastructure distributes more than 28 billion units of electricity to cover25 million consumers across different parts of the country including Mumbai and Delhi.

Tata Power:Indias oldest and largest private sector power utility with an installed

generation capacity of over 2977 MW.The Company has

also executed several overseas projects in the Middle

East, Africa and South East Asia

CESC Ltd.: It is a fully integrated power utility with its operation spanning the entire value

chain: right from mining coal, generating power,

transmission and distribution of power. They serve 2.3

million customers within 567 square kilometres of Kolkata

and Howrah.

DPSC Ltd: DPSC Limited engages in the generation, transmission, and distribution of

electricity in West Bengal, India. It owns and operates

two generating stations at Chinakuri with a generating

capacity of 30 megawatts and at Disherdarh with a

generating capacity of 12.2 megawatts. The company also owns two 11 KV networks


4/23

Power Grid Corporation of India Limited: (PGCIL), a Navratna state-owned company, is

one of the largest transmission utilities in the world.

Power Grid wheels about 45% of the total power

generated in India on its transmission network with a

total transformation capacity of 79,500 MVA.

Torrent Power: Entered the power sector by acquiring two old state owned electricity

companies and turned them into power utilities

comparable with the best.

NTPC LTD. (INDIA)


5/23

Chapter 2: Company Profile

Indias largest power company, NTPC was set up in 1975 to accelerate power development in

India. NTPC is emerging as a diversified power major with presence in the entire value chain

of the power generation business.NTPC ranked 317thin the 2009, Forbes Global 2000

ranking of the Worlds biggest companies.

The total installed capacity of the company is 30, 144 MW (including JVs) with 15 coal

based and 7 gas based stations, located across the country. In addition under JVs, 3 stations

are coal based & another station uses naphtha/LNG as fuel. By 2017, the power generation

portfolio is expected to have a diversified fuel mix with coal based capacity of around 53000

MW, 10000 MW through gas, 9000 MW through Hydro generation, about 2000 MW from

nuclear sources and around 1000 MW from Renewable Energy Sources (RES).

NTPC has been operating its plants at high efficiency levels. Although the company has

18.79% of the total national capacity it contributes 28.60% of total power generation due to

its focus on high efficiency.Presently, Government of India holds 89.5% equity in the

company and the balance 10.5% is held by FIIs, Domestic Banks, Public and others. NTPC is

engaged in engineering, construction and operation of power generating plants.

Companys VISION

"A world class integrated power major, powering Indias growth, with increasing global

presence


6/23

MISSION

"Develop and provide reliable power, related products and services at competitive prices,

integrating multiple energy sources with innovative and eco friendly technologies and

contribute to society"

Market Share

Financial Analysis of NTPC

Analysis of financial statements has been done with a view to know the strength or

weaknesses of the firm and to make forecast about the future prospects of the firm. And

thereby it enables the financial analyst to take different decisions regarding the operations of

the firm.


7/23

Analysis of Profit and Loss Account:

The P&L account for two years is given below

Ratio Analysis:

FY Ending 2005 2006 2007 2008 2009

Current Ratio 1.91 2.56 3.16 3.22 2.89

Quick ratio 1.65 2.18 2.80 2.88 2.59

Cash ratio 0.90 1.38 1.89 1.88 1.52

Net Profit Ratio 25.76 22.29 21.06 20.01 19.56

Debtor Turnover

Ratio16.40 30.09 26.03 12.42 11.70

Fixed Asset Turnover

Ratio 1.01 1.13 1.27 1.42 1.27

Working Capital Ratio 3.66 2.72 2.15 2.10 2.07

Debt-Equity Ratio 0.41 0.45 0.50 0.52 0.60

Debt Ratio 0.99 0.99 0.99 0.99 0.99

Except for year 2005, the current ratio is more than 2:1 which shows that NTPC has

sufficient liquid assets to support its short term obligations. The current ratio shows a

fluctuating trend.Current Assets are highest in year 2007 owing to large cash and bank

reserve.

The quick ratio is rising increasingly except for a small dip in 2009 FY. Quick ratio is more

than 1:1 which is a positive sign but leaves a room for investment of cash by NTPC so as to

increase its profitability more.


8/23

Except for FY 2005, CASH ratio is more than 1:1 and is increasing except in FY 2009.

Considering 2005 as the base year, trend analysis shows the decrease in last year is due to an

abrupt increase in CL (35%) as compared to cash (8.9%) as compared to previous year.

The debt turnover ratio shows rise over the years but the average collection period is less than

a month which indicates that NTPC do not carry its debtors for long and collects money from

them timely. This helps NTPC to use funds elsewhere.

The working capital ratio declines continuously. This is not good for the firm as it shows that

the working capital is unable to produce enough sales. But still its greater than 2:1 ratio

which is acceptable.

The leverage ratio is very less and is unsatisfactory. It is however increasing very slowly over

the years. But the strong balance sheet on asset side enables NTPC to expand and come up

with new projects.

Chapter3: Raw Materials and Services sourced by NTPC

Power shortage in several parts of the country has become a normal feature with adverse

impact on economic production of goods and services apart from difficulties in the daily lives

of millions of consumers.Presently several power plants cannot operate at full plant load

factor on account of shortage or poor quality of domestic coal. Eastern Coal Fields is unable

to supply more than 15 million tonnes of coal to Farakka&Kahalgaon Super TPS against their

requirement of about 27 million tonnes per annum. Reports of CEA indicate that the current

stock of coal in several Thermal Power Stations of NTPC is supercritical. Kahalgaon and

Farakka often have zero days of coal stock! Development of new coal fields has been slow.

This shortfall is being met by imported coal. The Power Ministry has reportedly decided that

all TPS of NTPC must mix at least 5% of imported coal with domestic coal to improve their

quality. This clearly implies that there are serious production and transport bottle necks.At present there are ten thermal power plants which are located adjacent to or on the banks of

National Waterway 1(Ganges) in West Bengal and Bihar. Several more new power plants,

apart from capacity additions in existing power plants, are expected to come up by 2017

which include, interalia, Kahalgaon II, Barh I &II and Farakka III of NTPC. It is estimated

that thermal power plants consume about 10,000 tonnes of Indian coal (6,000 tonnes of


9/23

imported coal with lower ash content) per day for every 500 MW. A 60 wagon coal train can

carry about 1500 tonnes of coal, which means about 7 trains per day for every 500 MW.

Hence, for Barh Super TPS alone (3300 MW) nearly 25 trains per day will be required.

Keeping in view the existing traffic load on the Main Line passing through Bihar, it is almost

impossible for Railways to meet this demand. Hence, there is urgent need to develop an

efficient multi-modal transport system and inland water transport has to be an integral part

of multi-modal logistics solution. Liquefied Natural Gas is also used as raw material for

power generation in NTPC which is only transported through pipelines. The finished good of

NTPC is power hence there is no need of logistics in delivering this to their customers as it is

simply put in a power grid.

Total Plants with respect to their Capacity:

Regional Spreading of Raw Materials used by NTPC:

National Waterway 1


10/23

A 1620 km stretch of Ganga between Allahabad and Haldia was declared National Waterway

1 by Government of India in 1986. Least Available Depth (LAD) of 2.5 m is being

maintained between Haldia and Farakka (560 km) and 1.8 m to 2 m between Farakka and

Patna (460 kms) by Inland Waterways Authority of India (IWAI) for about 330 days. IWAI

expects to soon provide 2 m LAD upto Varanasi for at least 300 days.

IWAI also issues fortnightly river notices for the entire stretch of NW 1. 24 hour Night

navigation facilities are in place uptoFarakka and this is to be extended upto Varanasi by

March 2010. A new DGPS station has been commissioned by IWAI at Bhagalpur in August

2009 and others are proposed to beset up at Katwa, Patna and Varanasi by December 2010.

Advantages of IWT

As per a NCAER study report prepared in 2006, one barge can carry cargo equivalent to 15

rail wagons or 60 trucks and on an international standard, the operating cost of IWT 2 per

tonne per mile is 1 cent by barge, 2.5 cent by rail and 5.3 cent by truck. IWT also provides

higher fuel efficiency as compared to either rail or road as 3.8 litres of fuel can transport one

tonne of freight through 827 km by barge while it is only 325 km by rail and 95 km by truck.

Fuel savings to the tune of Rs.1100 crore for every 10 btkm (3 lakh kilo litre) has also been

calculated for modal shift from road to IWT at diesel price of Rs.36 per litre.

IWT compares favorably with rail and road costs and if the economic costs of less carbon

dioxide emission and noise pollution are factored in, then IWT will score over rail and road

transport.

Key Features

Proposed Logistic Solution

1) Vessel call at Diamond Harbour/ Sagar Mid-stream transshipment.

(b) Movement of coal through barges to Farakka and Kahalgaon

Target Quantity 2.8 mnTonnes: 1.2 mn MT uptoFarakka and 1.6 mn MTuptoKahalgaon Power Plants.

2 Merry Go round of Barges will ply on the channel.(c) Discharge mechanism at Farraka and Kahalgaon

Jetty


11/23

Material handling equipment as stipulated by NTPC.

Explained in detail in table hereunder

Inland Water Transport provides an economically viable and reliable system for

transportation of 2.8 million metric tons of imported coal for Farakka and Kahalgaon

Thermal Power Stations of NTPC. Further follow up action in this regard is being

undertaken under the guidance of the Planning Commission.

Chapter4: LogisticsIssues for sourcing raw materialsLogistics is a process which interfaces and interacts with the entire company and with

external companies, vendors, customers, carriers and more. Logistics is responsible for the

movement of products from your vendor right through to the delivery at your customer's door,

including moves through manufacturing facilities, warehouses, third-parties, such as

repackagers or distributors. It is not shipping and receiving, nor is it traffic or warehousing.

Logistics must make work effectively. This is required by your customers and, in turn, by

your company.

For effective logistics, there are five key issues

1. Movement of Product

2. Movement of Information

3. Time / Service

4. Cost


12/23

5. Integration

1. Movement of Product: This is often the way that logistics is viewed in many

companies. Products moves should complement the corporate strategy. If the emphasis is on

cost reduction, lower inventories, customer service or whatever, then products must move in

a way that is consistent with the emphasis. Product must also flow from between and among

vendors, manufacturing sites, warehouses, and end-users. If it does not flow, then there is not

a supply pipeline.

The movement plan must be flexible. Forecasting may be the weak link in all corporate

planning and execution. So the movement must be able to adjust and deal with the swings in

business activity. This may require a multi-mode, and/or a multi-carrier and/or multi-level

service program to keep the global supply chain moving smoothly. For example, it may

require a mix of ocean and air modes to keep a smooth pipeline, especially if there are

significant swings in volumes and requirements.

2. Movement of Information: It is not enough to move product and materials. You

must know where they are. You must know what inventories are where and if critical action

is required. You must know what orders are coming in and when they must be delivered.

Information--timely and accurate-- is vital for sound decision-making. The information must

flow between the company and its suppliers, carriers, forwarders, warehouses and customers.

It must also move internally among purchasing, customer service, logistics, manufacturing,

sales, marketing and accounting. Since logistics is a process which interacts with many other

groups in the company, it is fundamental that a corporate system be in place.

3. Time / Service: the ability to respond to the dynamics of the global marketplace--

changing forecasts, customer requirements, new product introductions, new sourcing, and

how to manage all these changes--must be done quickly. Raw materials and components must

be ordered and arrive completely, accurately and quickly. Orders must be filled completely,

accurately and quickly. Service is more than having to expedite a shipment. Time/service is a

factor of competition, customer requirements, your company's position in the industry, your

corporate culture, how well everyone in the global supply chain works together, and how well

everyone works together in your company. Logistics is the link among all this.

4. Cost: Cost is the key measure by which logistics effectiveness is often measured

Freight, warehouse labor, public warehouse charges and other items on the P&L. The highest


13/23

price does not mean the best service, and it may not be the service you need. Nor does the

lowest price necessarily meet your needs.

However, there is no ready mechanism which really makes proper recognition in costs for

time/service or for adjustments in any part of the company plan. There is no item in the P&L

or balance sheet for Time/Service, which is the driver of a company's logistics efforts.

Logistics cost measurement is a shortcoming in the present accounting systems. In addition

there may be other issues such as currency conversion and fluctuations. Air freight is quoted

in the currency of the origin country. Ocean terminal and other accessorial origin charges are

also in origin country currency.

5. Integration: Within your company, between you and your customers and between

you and your vendors. Integration--bringing it all together--within your company is vital.

Logistics is a process. Effectiveness requires that each relevant element of the organization

do its part. The traditional organization with its boxes and defined responsibilities is a

collection of functional silos. Each silo segments and collects different parts of the vendor

purchase/manufacturing/sales activity and stores it. Hence there is no process. There is a

compartmentalization, a fragmenting of the process. This creates an anti-process effect.

Integration with customers is important. You and everyone in your company must be working

and satisfy your customers. You should review written customer requirements with everyone

in the logistics department and with everyone in the company.

Benefits of an effective logistics and distribution network:

An efficient logistics and distribution system affects the whole supply chain. In its absence,

the firm may lose out to its competitors in spite of a having a better product and better value

proposition. The logistics network forms backbone of the supply chain connecting various

functions-together.

Benefits of an effective logistics and distribution system:

1. Lower costs due to better utilization of resources

2. Faster cash-to-cash cycle

3. Lesser inventory levels

4. Increased reliability of delivery to customers

5. Decreased respond time.


14/23

Few logistics issues faced by NTPC

1. NTPC Kazakhstan plan flounders on logistics issues

India is the world's fifth largest energy consumer and imports 75% of its needs, accounting

for 3.5% of global energy consumption. While Kazakhstan, Turkmenistan and Uzbekistan

have considerable hydrocarbon reserves, Tajikistan and Kyrgyzstan have large hydropower

potential.

State-run power utility NTPC Ltd planned to set up power projects in Kazakhstan to secure

coal supplies for its fuel-starved plants in India. NTPC had zeroed in on Karaganda region,

where it was offered a bituminous coal mine and project site for setting up a power project. It

was also exploring the option of securing gas supplies from Kyzlorde oil and gas field.

The cost of coal transportation from Karaganda region in Kazakhstan to Mundra port in India

is over $126.34 per metric tonne, which is very high, making coal supplies to India unviable,

according to a power ministry official. Similarly, gas production and reserves is limited at

Kyzlorda oil and gas fields, rendering gas supplies also unviable.

Land-locked Kazakhstan has coal reserves of 35 billion tonnes and is looking at ways to

monetize it. However, transporting the fuel from the country is a huge concern. It will be very

costly to get the coal here. Also it is very difficult to get the power from the projects to India

as it will involve construction of transmission links across China or Pakistan

NTPC's plants are facing an acute coal shortage and the utility has not succeeded in any of its

overseas plans to source coal or natural gas. Fresh coal supplies are critical for NTPC as the

fuel powers at least 80% of its installed capacity of 31,134MW. The firm plans to have an

installed capacity of 75,000MW by 2017.

2. Stake up in two Indonesian coal mines

The company`s coal requirement is likely touch 165 million tonnes (MT) in the next financial

year (2011-12), of which it may import 12-15 MT. Currently, we are using 155 MT of coal,

our requirement is likely to go up 165 MT. NTPC is also looking at directly importing about

60% of its coal requirement of about 15 million tonnes during the next fiscal, instead of

sourcing it from State Trade Corporation and MMTC.

The state-owned company is also planning to bunch together its equipment order of 7-9

supercritical sets of 660 MW each, through which it is hoping to generate a discount of 5-10

per cent. In the last one year, the equipment procurement cost has seen a huge increase


15/23

mainly on account of increase in raw material prices like cement and steel. Thus, companies

are looking at innovative ways to cut down project costs and bulk procurement is one of them.

In general, the price difference between a supercritical and a subcritical project is around 5

per cent and it occurs mainly on account of higher civil engineering cost.

Therefore if NTPC stake up in two Indonesian coal mines then the company is able to

generates 5% saving from its bulk procurement and it would be able to buy supercritical

equipments at subcritical cost. This means company will have to spend a total of about Rs.

25,000 crore for procuring the seven supercritical equipments.

Another benefit of this (bulk ordering) will be that it attracts a large number of bigger players.

While ordering for smaller projects requiring 2-3 equipment is able to attract only major

players like Bhel and Russian companies, we are sure that such a bulk ordering will attract

other global players like Japanese and German companies. If that happens our saving will go

up to at least about 10 per cent Rs 2,500 crore,

State-owned NTPC is likely to pick up stake in two coal mines in Indonesia, a move that

would help the company secure its raw material requirement.

3. Inland waterways for coal

In a bid to curb inordinate delays in coal supplies to power plants at Farakka, Kahalgaon and

Barh, the government-owned National Thermal Power Corporation (NTPC) proposes to

exploit river-routes. The company has been facing problems with railway rakes thereby

resulting in critical stock of coal at its plants. Both Khalagaon and Farakka are running with

critical stock positions of less than seven days owing to non-receipt of imported coal and

inadequate supplies of coal from the mines within the country. There is no proper

transportation facility in India, which creates some drawback in procurement of coal with

inland waterways. Inland waterway is the cheapest way for procuring any raw material.

Chapter 5:Documentation while sourcing Material

Memorandum of Understanding (MoU)


16/23

A Memorandum of Understanding (MoU) was signed on 24.9.2008 between Inland

Waterways Authority of India (IWAI) and NTPC Ltd. for proposed movement of

importedcoal from Haldia / Sagar to Farakka, Kahalgaon, and Barh power stations of NTPC

through inland water transport (IWT) mode.

As per MOU entered into between NTPC and IWAI, NTPC shall provide a commitment of 2-

3 million tonnes of coal and also assured return cargo in the form of fly ash from NTPC

Power Plants. NTPC is expecting that delivered cost of coal to power station coal stack yard

would be competitive / cheaper viz-a-viz rail / road transportation

IWAI on the other hand committed to provide navigational channel for the movement of

barges, undertake project development activities and design suitable framework for the

induction of private player for carrying out the entire coal movement.

Feasibility Report

Pursuant to the signing of the MoU, IWAI got a Feasibility Study carried out covering all

elements and economics of transporting the coal across the identified waterway stretches. In

Phase-1 the stretch identified was Haldia to Farakka power station. Thereafter in Phase 2 the

movement was to be extended to Kahalgaon and Barh. The Draft Feasibility Report was

handed over to NTPC in Feb. 2009. However, keeping in view the requirement of NTPC, it is

now proposed to meet the needs of both Farakka and Kahalgaon Super Thermal Power

Station in Phase 1 itself.

Chapter 6: Procurement Process

Procurement activities taken by NTPC are to satisfy varying requirement of equipment,

material and services. Procurement at NTPC is initiated on the basis of approved indents/

requisitions and indicating budget and project estimate provisions. The contract services/

materials management services receive the requisition/ indent for the procurement of

materials duly approved by the competent authority and then plan and organize theprocurement action. All the activities undertaken at NTPC are regulated by a guideline called

Delegation of Power. The guideline lays down the responsibility and authority of various

level executives in the Public sector Enterprises.

Coal is the main raw material used in power generation by NTPC and is imported as well as

bought from domestic market. Their main supplier of coal in the domestic market is State


17/23

Owned Coal Mines. NTPC has installed about all its power plants in the coal abundant states

hence almost all of their logistics facilities are provided by Indian railways. Karnataka,

Chhattisgarh, Orissa and Jharkhand are their main domestic suppliers. NTPC imports coal of

high calorific value mainly from Indonesia and Ethiopia.

Logistics Service Providers:

1. Indian Railways (Domestic):Development of Railways and Coal Mining in India has commonhistory as both

started in the later part of the nineteenth century. Coal was basic energy source of the

prime movers of not only theindustries but also the Railway itself till diesel or electric

locomotivescame into place.Both the industries were thriving on the support of the each

other.Today coal constitutes 46.66% of the total revenue earning trafficof Indian

Railways (229.82MT out of total 492.5 MT goods: 2001-02).53 % of the total movement

of coal is shared by the IndianRailways.( 175.58 MT out of total 329.14 MT : 2001-02).

2. BalmerLawrie& Co. Ltd. (Import/ Water Transport):BalmerLawrie offers seamless Logistics Solutions to it's clients through a country-

wide network of offices including all Major Airports & Ports in India,and a World-wide

network of associates in more than fifty countries.The expertise of BalmerLawrie in

Logistics Services dates back to Nineteenth Century when it started this activity and it has

grown manifolds over the past decade. Containerized,Break-Bulk and LCL cargo on

Door-toDoor basis, Out-sized / Heavy-Lift consignment and Specialized Project Cargo

including carrier selection,documentation at India and Abroad,CHA and inland

movement in the countries of Origin and Destination.Ably assisted through its own

Container Fright Station at JNPT, Navi Mumbai, Chennai and Kolkata.

Procurement of any material for any plant or the office of NTPC is done by twoprocesses.

Procurement through tenders Emergent Procurement

In case of urgency the respective department is allowed to make procurement through cash up

to the limit of Rs. 10,000 only. But in case of the normal procurement that is done by

tendering, a standard procedure is followed where the intender sends the procurement list to

the finance department for the goods valued over Rs. 10,000 for vetting. Once the finance


18/23

department clears the cost aspect of the tenderitis send for the required approval from the

competent authority as described in the DOP. After getting the required authorization the

indent is forwarded to materials, contracts or HR services as is suitable. From there a tender

notice is issued and the procurement process starts. Tender process is given below:

Types of Tender:

a) Open Tender: Procurement or value Rs. 1 lakh and above must be done through opentendering. It is accessible to all known, reliable and prove sources of particular

equipment or material. This process will take place once in every three years by

advertising in two or more newspaper.

b) Limited Tender: It is a type of tender where instead of sending din enquiry to allpossible vendors through newspapers, a limited number of vendors are intimated

through post or fax. It cant be issued without proper explanation and requirement.

c) Single Tender: This type of tendering is the casiest and fastest to acquire a good butrequires lot of paper work and authorization before the acquisition can be initiated.

However, Single Tendering is done in many other cases which are not mentioned

anywhere in the DOP.

d) E-Procurement: E-procurement promises the following gains to the suppliercommunity.

a. No geographical barriers.


19/23

b. Reduction in vendors cost as they need not to travel our offices(communication cost).

c. Complete transparency in the process, leading sound decisions.

Chapter7: CASE Study

Case: Movement of coal via Inland Water Transport (IWT) in Bihar

A meeting was held in Patna on 25th February, 2010 to discuss the prospects of movement of

coal for various power plants located on the banks / in the vicinity of Ganga through inland

water transport (IWT).

National Wareway 1 ought to be viewed as a dedicated freight corridor for the States of

Uttar Pradesh, Bihar and West Bengal. The river Ganga provided direct linkage of Bihar to

Kolkata and Haldia ports and NW 1 was now ready for large scale commencement of cargo

movement. River Ganga (NW -1) was now ready for 24 hours operation between Haldia&

Varanasi (1187 km). IWT provide a viable, environment friendly logistics solution for

transportation of coal for existing and upcoming thermal units of NTPC, BSEB,

&KantiBijaliUtpathan Nigam Ltd. A logistics solution was designed for transportation of 2.8

million tonnes of imported coal for Farakka and Kahalgaon Super Thermal Power Stations

and stated that it was 2 possible to suggest a viable, multi-modal logistics solution whereinIWT was a major component for other power plants. Barauni thermal plant needed six rakes

of coal per month and, once expansion is completed, their requirement was about to increase

to six rakes of coal per day. Representatives of NTPC stated that coal transportation through

IWT mode shall be viable and could be considered as a supplementary mode of transportation.

They also stated that the coal requirements of all the power generating agencies needs to be

assessed and a policy decision needs to be taken by the Central Electricity Authority (CEA)

on usage of various modes of transports (Rail, Road & IWT) for coal transportation. They

further stated that their existing units could at best utilize only 15% of imported coal as it hadhigh calorific value and low ash content and could be used only after blending the same with

domestic coal.

IWAI stressed that Bihar was the biggest loser if NTPC units at Farakka and Kahalgaon

continued to function at PLF ranging between 50 to 65%, which was much below the NTPC


20/23

average of 90% or more and the situation will get aggravated if the new units at Barh were

also forced to operate at low PLF due to shortage of coal, either due to delay in development

of linked coal mines, inadequate coal linkages or transport bottlenecks. Hence, there was

need to fully utilize the dedicated freight corridor already in place in the shape of NW 1

without losing further time. Even in case of those plants which had full coal linkage, CIL

would not provide more than 80% of coal requirement and balance had to be arranged from

other sources, there was a strong case for utilizing inland water transport for transportation of

imported coal and possibly also domestic coal. For the upcoming power units at Pirpainty,

Lakhiserai, Chausa (Buxar), it would be appropriate to consider IWT as a transport option at

the planning stage itself so that coal handling plant could be suitably designed. Further, if

power plants are able to earn carbon credits, then that would be an added attraction for

power plants.

IWT offered a viable logistics solution for movement of bulk cargo including coal and that

Bihar should take advantage of this national asset. The matter was discussed with concerned

agencies and a concrete proposal was formulated on use of IWT as a supplemental mode for

transportation of coal. Also NTPC officials took all steps to ensure improvement in PLF of

Kahalgaon and Farakka STPS so that power availability to Bihar could improve.

Chapter8:Other Information related to project

NTPC to explore waterways for coal transportation

NTPC has finally given in to pressure from Prime Minister's Office (PMO) and shipping

ministry, and agreed to explore inland waterways to carry coal to some of its critical power

generation plants. The company, top power generator in the country, has asked Inland

Waterways Authority of India (IWAI) to arrange for transporting 3 million tonne of imported

coal to Farakka and Kahalgaon plants in West Bengal and Bihar, respectively.The agreement

is a result of lengthy negotiations between IWAI and NTPC over the issue, which also saw

the latter walking out of the potential deal last month. But consistent pressure from shipping

ministry and PMO kept the power producer in the state of uneasiness. The fact that its coal-

starved power plants need the fossil fuel to run productively also encouraged NTPC to

agree.However, it shortened the list of plants that would utilise waterway for getting coal.


21/23

The initial list had also included the plant at Barh in Bihar. The order has been given to IWAI

as it is responsible for development of inland waterways.

NTPC has agreed to give long-term orders to transport imported coal to Farakka and

Kahalgaon plants. Out of the total order of 3 million tonnes (mt) per annum, 1 mt will be

carried to Farakka and 2 mt to Kahalgaon. A commitment has been made to this effect for 7

years, IWAI vice chairman Sunil Kumar told FE. However, the public-sector firm has put a

condition that the total delivery cost should be lower than the cost incurred in carrying coal

through railways, Kumar added.The company carries 40% of its coal requirement through

railways and the balance comes through roadways as the consuming plants are near coalfields.

As per IWAI estimates, NTPC will incur Rs 650 per tonne to transport coal to Farakka either

through railways or inland waterways. However, the company will save Rs 235 per tonne if it

prefers inland waterways to railways to take the imported coal to Kahalgaon from Paradip

port. Despite differences over cost, the two institutions have decided to start transporting coal

from July 2012.

India: NTPC floats $1.5 bn tender for coal imports (31-07-2010)

NTPC Ltd has floated an international tender for the direct procurement of 14.5 million

tonnes of coal for the first time. Valued at around $1.5 billion (around Rs6,990 crore), the

tender is the fallout of a controversy over state-owned trading firm MMTC Ltd's execution of

an order to import 12.5 mt coal for NTPC.

Direct coal imports will exclude state-owned trading firms such as MMTC and State Trading

Corp. of India Ltd, the usual conduits for such trade, but help NTPC buy coal at competitive

rates, avoid paying commission and thus lower generation costs. The decision is in line with a

new coal import policy approved by NTPC's board.

Mint had reported on 5 August about NTPC's plans to import coal directly. One of the

bidders for an earlier tender floated by MMTC on behalf of NTPC, Knowledge Infrastructure

Systems Pvt. Ltd, had alleged wrongdoing in the way the order was executed, and demanded

an investigation into the procurement process and an intervention by the Prime Minister's


22/23

Office. The new tender calling for expression of interest (EoI) was floated on 20 July and the

last date for the submission of EoIs is 10 August. The utility has invited proposals from coal

suppliers for buying 14.5 mt of coal either on free-on-board (f.o.b.) basis or cost and freight

(CFR) basis.

In the first method, the responsibility of shipping the coal is with the buyer (NTPC), whereas

the supplier will have to make shipping arrangements in the second. The tender also seeks

proposals for transporting coal from the originating port to the discharge port in India as well

as for handling and transportation of imported coal from the discharge port to NTPC's power

stations. Fuel supplies are critical for NTPC as most of its coal-based projects don't have

sufficient stocks. At least 80% of its installed capacity of 31,704MW is coal-based. NTPC

owns and operates 15 coal-based power stations and has a coal requirement of 150 mt per

annum (mtpa). Its coal imports are likely to increase to about 24.8 mtpa by 2015-16.

Coal demand in the country is around 600 mtpa and is set to touch 2,340 mtpa by 2030. India

has a known coal resource base of 264,000 mt, the fourth largest in the world, of which

proven reserves are around 101,000 mt.

NTPC seeks 15 million tonnes steam coal import for 2011-12

Asias second largest power producer by market value NTPC Ltd seeks 14.5 million tonnes

of coal for the year ending March 2012 in its largest annual import.A company official said that NTPC is importing the fuel directly for the first time rather than

arranging for supplies through Indian state-owned trading companies such as MMTC Ltd and

the State Trading Corp of India.

The official said that bidders have until Aug 10 to submit expressions of interest to supply the

coal on either a free-on-board or cost and freight basis.

State owned NTPC, which has 15 coal-based power stations, plans to more than double

installed capacity to 75,000 MW by 2017.


23/23

References

Books - Reference

1) Companys 33rd Annual Report2) Misc. reports prepared by NRLDC.

Web - Reference

3) www.ntpc.co.in4) www.cercind.org5) www.nrldc.org

g-4 amtm project_jaypee business school

Documents