Given the litigation over the cap on fixed costs, the government would desist from auctioning more captive coal blocks to power companies till the judicial decisions are delivered but would, in the interim, award linkages to Coal India’s mines to power purchase agreement (PPA)-supported developers. The move, according to official sources, would ensure that court cases initiated by winners of coal blocks under the auctions held earlier won’t deprive power plants that have tied up long-term buyers of fuel.
“The idea is to ensure that fuel supply (through coal linkages) is linked to obligation to supply power,” a senior government official said.
With auctioning put in abeyance, the coal ministry is also considering the option of awarding captive blocks to select power suppliers having PPAs with states the same way as the ultra mega power plants are allotted blocks. A UMPP is awarded to a firm that quotes the lowest power tariff and it gets assured fuel supply with a coal linkage.
Out of over 60 captive coal blocks reallocated after the Supreme Court cancelling previous allocations marred with irregularities, 11 went to power companies. Aggressive bidding by power companies had resulted in these companies agreeing to pay additional premium to the respective state states over and above the royalty and the reserve price.
However, with the Centre’s advisory to states preventing power plants running on these captive coal blocks from inflating their fixed charges prompted at least some of these companies to re-evaluate the viability of their ventures.
Two companies — Jindal India Thermal and Monnet Ispat — have moved the Delhi High Court against the proposed cap on fixed charges, while the government, with an express interest to keep tariff lower, has refused to budge.
“We are not abandoning the process of auctioning blocks to power developers as we do not see any problem with our process. But we would proceed with the next round of auctions only after clarity prevailed on the issue of capping of fixed cost,” an official said.
The deferment of auction and the decision to support PPA-ready units with fuel linkages from Coal India are also because all producing blocks and the ones which are poised to start production have already been auctioned and the remaining blocks would require intensive prospecting and paperwork to be auction-ready.