Coal Quality in the Indian Electricity Sector

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(with S. Khanna and A. Jindal)

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An overwhelming majority of India's electricity is produced using coal. This coal is typically sourced from mines using long term power purchase agreements. The quality of the coal, defined in terms of gross calorific value, can deviate from contractually agreed norms specified in the power purchase agreement. These deviations are common enough to have their own term - "slippage".

 

Scant evidence exists that documents the extent of slippage, and what factors correlate with slippage. We use new datasets published by the Coal Ministry, together with administrative data from the Indian Railways, and the Central Electricity Authority to establish these factors. Recent work in industrial organization can serve as useful guides to determine our econometric specification.