Pvt power projects to get coal policy cover to beat crunch

Written by Subhash Narayan | Noor Mohammad | Noor Mohammad | New Delhi | Updated: Jun 6 2013, 05:35am hrs
There is finally some relief for 66,000-MW domestic coal-based generation projects awarded through the

tariff bidding route. The Cabinet is likely to approve amendments to the coal distribution policy, allowing power firms importing coal to meet shortfall in fuel

supply from Coal India to pass on additional fuel costs to consumers.

The Cabinet Committee on Economic Affairs ( CCEA) is expected to take up this matter for consideration in its meeting on Friday. The inter-ministerial panel on coal price pooling suggested amending the coal distribution policy on the advise of the Central Electricity Regulatory Commission (CERC).

While power projects of Essar, Adani and Jindal would benefit from the move, utilities of beneficiary states could end up paying extra Rs 0.30-0.35 a unit as cost of imported coal in these projects would be allowed as pass-through in tariff.. Many of these projects are facing the risk of default on power purchase agreements (PPA) due to the reduction of coal supply from CIL or delays in production from captive blocks.

It may be noted that the CERC, in two recent orders, allowed compensatory tariff (over and above what is agreed in the contracts) for two imported coal-based projects of Adani Power and Tata Power.

For the projects, which are domestic coal-based, the firms had signed power purchase agreements with state electricity boards on the basis of 100% coal supply from CIL or captive mines allocated to them for running projects at 85% of the plant load factor. While the CIL said that it is not in a position to deliver the committed coal quantity and would provide only 80% of the coal contracted earlier, some captive mines also failed to take-off on time because of environment approvals and now rely on the state-owned producer for supply under a tapering inkage scheme.

Highly placed sources in the power ministry said the changes would be notified immediately after the CCEA approval so that electricity regulatory commissions could take up tariff petitions of domestic coal-based projects on the basis of their fuel imports. "The changes in the policy would only benefit projects that have to resort to coal imports as CIL is unable to supply requisite coal from domestic sources. It would not have any change in the scheme of things for ultra mega power projects that are given captive coal blocks and other projects that are based on captive coal block allocations," said the source.

Once the policy is approved, the move could also benefit old power projects that come up for renewal with CIL.

Close to 100,000-MW of coal-based capacity are installed in the country prior to April 2009 when CIL stopped signing FSA with power produecrs. Moreover, the changes would also benefit any future projects of NTPC based on tariff-based bidding. All existing projects of NTPC are based on cost plus mechanism where the cost of fuel is a pass-through in tariff.

Private sector projects faced the problem on fuel as most of their projects are tariff-based bidding where fuel cost increase is not a pass-through in tariff.