private players into captive coal mining so that domestic production could be stepped up.
Companies like Jindal Power, which are already generating power from captive coal, have been given 18 months’ time to switch to the PPA mode, while upcoming plants are required to sign contracts at least six months ahead of their scheduled commissioning.
The change in the guidelines was proposed by the power ministry in September 2012 just after a CAG report castigated the government for allowing private companies to reap windfall gains of R1.86 lakh crore by allocating coal blocks to them without auction between 2006 and 2009.
But since there was no clarity about legal tenability of the proposed amendment, the move was put on hold. Instead the matter was referred to the law ministry for opinion.
“Without securing lease from state governments, coal mining cannot be started,” said Dilip Kumar Jena, a mining consultant with PWC.
Most of the IPPs, which have been allocated captive coal blocks are yet to be become operational. Jindal Power’s 1,000-MW Tamnar is the only operational power plant.
It has been selling its entire power in the merchant market despite using captive coal . Former power secretary RV Shahi welcomed the coal ministry’s move, saying: “ It was never the idea of the merchant policy that entire power be sold in the open market.”
He added that at least 85% electricity should be supplied under long-term PPA from merchant plants, though balance can be sold in the free market.
Anticipating change in the captive coal block allocation policy, Jindal Power recently signed a 15-year long-PPA with Tamil Nadu for 400 MW supply from the Tamnar plant. Other coal block allocatees are also expected to follow suit.