Power firms losing captive mines may get tapering linkage

Written by Siddhartha P Saikia | New Delhi | Updated: Aug 18 2014, 06:08am hrs
In a relief for the private power companies, such as Essar Power, JSPL, Monnet Ispat, Sterlite Energy and Adani Power, which faced de-allocation of their captive coal blocks, they may get tapering (or temporary) coal linkages wherever the end-use power plants are being set up.

Recently, the power ministry had circulated a note to be taken up by the Cabinet Committee on Economic Affairs (CCEA) with several proposals for giving coal linkage to the power projects that do not have letter of assurance (LoA) or fuel-supply agreement (FSA), but which are already commissioned or will be commissioned by March 2015 or up to the end of 12th Five-Year Plan period.

According to the ministry's proposal, wherever the linked coal blocks are in the process of de-allocation and the end use power plants are commissioned or are at an advanced stage of commissioning, the plants should be granted tapering linkages.

In the event that the coal blocks are finally de-allocated and the end-use power plants are commissioned, such tapering linkages should be converted into long-term linkages, a senior government official with direct knowledge of the proposal told FE. But, the power ministry has put a caveat that those cases of captive coal blocks in which CBI has initiated criminal proceedings or does so in the future will not be eligible to be covered for granting tapering linkages. All such cases will be subject to court judgements.

It is not immediately known how many power projects facing captive mine de-allocation would benefit if the power ministry's proposal is approved by CCEA.

On June 21, 2013, the CCEA under former Prime Minister Manmohan Singh had asked Coal India (CIL) to sign FSAs for about 78,000 mw of capacities with quantities of 65% for first two years, 67% for third year and 75% in the fourth year of annual contracted quantity (ACQ). Now, the power ministry has proposed that for the plants where LoAs have been granted but which are not part of the FSA list of 78,000 mw, the fuel may be made available at 60% of the quantity required for maintaining 85% plant load factor (PLF).

According to the power ministry, capacities worth 14,600 mw will become non-performing assets (NPAs), as they do not have fuel-supply agreements. Of this, there are about 4,660 mw capacities which are getting commissioned by March 2015 and have signed power purchased agreements (PPAs) with discoms. Coal India is willing to supply fuel on MoU basis to these power plants from mines having evacuation constraints plus with a premium of 40%. However, this is turning out to be a non-starter both on the account of problems of evacuation as well as higher cost. There are also another 4,095 mw of projects without any coal linkage.

The power ministry believes that unless these power projects start running, the government's commitment of providing 24-hour electricity will become difficult to achieve, Also, idling generation capacity results in significant cost to the economy.

The coal requirement for power plants in 2014-15 is around 423 million tonne, which would touch 490 million tonne in 2015-16. As per the target for Coal India, it is required to supply 408 million tonne to power plants in the current financial year.