Assured fuel likely for more power units

New Delhi | Updated: Sep 5 2014, 10:15am hrs
Power PlantIf the plan materialises, these power plants will have a benefit similar to the one enjoyed by scores of other post-2009 power plants. (Reuters)
In a move that could benefit coal-fired power projects aggregating 20,000 MW set to come up by the end of 2016 but without any assured supply of the fuel, the power ministry has proposed that to start with, they be given at least 50% of the normative coal requirement to run the plants at a plant load factor (PLF) of 85%. If the plan materialises, these power plants will have a benefit similar to the one enjoyed by scores of other post-2009 power plants with a combined capacity of 78,000 MW that, under government-mandated fuel supply agreements (FSAs) with Coal India, are assured comfortable levels of fuel supplies till end-FY17.

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In a Cabinet note prepared by it, the power ministry has also said that supplies could be ramped up in due course depending on coal availability. If CIL cannot meet the supply requirements under the new FSAs out of its own production, it can import coal to make up for the shortfall and resort to price pooling to mitigate the impact of the high cost of imports on the power plants.

The note reviewed by FE says that since pooling is to be confined to post-2009 plants, in an an optimistic scenario assuming enhanced local production of the fuel, the increase in cost of power generation would be 74 paise per unit for 2014-15, 44 paise for 2015-16 and just 5 paise for 2016-17. Unlike FSAs signed earlier, the proposed ones wont have a penalty clause for non-fulfilment of obligation on CIL, but this, the ministry said, could be reviewed after three years.

According to industry sources, the move could benefit Bajaj Hindusthans 1,980 MW Lalitpur project, GMR Energys 1,370 MW GMR Chhattisgarh project, Adani Powers 1,320 MW Tiroda unit, Essar Powers 1,200 MW Singrauli plant and Monnet Powers 1,050 MW Malibrahmani project.

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These and other plants that are proposed to come under the new FSA regime have been or are to be commissioned in the 12th Five Year Plan (in fact all of these plants could be on stream latest by 2016-end). They have signed MoUs with CIL but dont yet have even a letter of agreement (LoA) with the coal producer, not to speak of FSAs.

Following a presidential decree issued in April 2013, CIL started signing FSAs with specified post-2009 power plants and as on date, about 170 such agreements have been signed with plants with a combined capacity of close to 78,000 MW. CIL was initially reluctant to sign these agreements, citing shortage of coal and apprehending that the scaling down of e-auctioning of coal for this purpose would hit its profitability. The supplies, as per these FSAs, will be made at 70% of LoA in the fourth quarter of the current fiscal, 75% in 2015-16 and 80% in 2016-17.

The power ministry also proposed that in the case of power plants among the above with captive mines, if the coal blocks are finally deallocated (given the Supreme Court had termed them illegal) and the end-use power plants are commissioned, the extant tapering linkages should be converted into long-term ones. Captive coal block allocations against which the CBI has initiated criminal proceedings or does so in the future will not be eligible for tapering linkages. All such cases will be subject to the Supreme Court judgment. But if no wrongdoing is established by the CBI regarding the allocation of the block, tapering linkage should remain and CIL should not charge premium on coal supply under such linkage.

The ministry says that CIL will explore ways to enhance production projected at 433 million tonnes for the current fiscal and seek ways of possible diversion from other end users like steel and fertilisers. For the balance requirement, CIL will import coal and the same could be supplied to these power plants at the pooled price. The ministry, however, wants to accord grants priority to plants with older FSAs over the new FSA holders. Pooling will only be done for plants commissioned after 2009 as plants commissioned before had expressed reservations on pooling of prices.

By Sumit Jha