The coal ministry is set to move the Cabinet Committee on Economic Affairs (CCEA) soon to relax ?tapering coal-linkage? guidelines so that it can allocate fuel to projects totalling 11,000-mw capacity, which are grounded due to delay in production from allocated captive coal blocks.

This is because these projects, entailing an investment of R60,000 crore, need coal supply for a longer period than what is allowed under the existing policy.

The ministry’s long-term coal-linkage committee is meeting here on Friday to discuss the issue. Fuel supply agreements ( FSAs) signed under the tapering coal-linkage policy are valid for three years only and the zero (normative) date begins when developer starts production from the allocated captive block.

The power ministry has already endorsed requests of these projects for extra coal supplies under tapering linkage. However, it has left it for the coal ministry to decide whether the latter can relax tapering guidelines on its own or need to seek CCEA’s nod for that. ?It is for the coal ministry to decide whether it wants to go the CCEA or take its own view on relaxation of tapering guidelines? a senior power ministry told FE.

These projects ? which also include Essar Power’s Mahan and Adani Power’s Tiroda, Damodar Valley Corporation’s Mejia, Gujarat State Electricity Board’s Ukai and Mahagenco’s Parli ? are part of the 78,000-mw capacity scheduled for commissioning by March 2015 and where fuel supply agreements ( FSAs) must be signed by Coal India (CIL) on an urgent basis as per a decision taken by the CCEA in June, which the coal ministry followed up by issuing a Presidential directive to CIL.

These developers have held back on signing FSAs as coal available under the tapering linkage policy would not be enough to meet their fuel requirements.

The power ministry has endorsed requests of these projects for extra coal supplies under tapering linkage on the ground that these developers will take a while to start production from allocated mines due to hurdles in obtaining environmental clearances and acquiring land.

For example, land acquisition is yet to begin for Mahanadi & Machakata captive block, which has been allocated to Ukai and Parli for meeting their fuel requirements.

Similarly, DVC is facing hurdles in acquisition of land for starting mining work at its captive block, Khagra Joydev & Barjor North. In other words, these mines are

unlikely to start production in three years.

Power projects based on coal supply from captive mines usually need tapering coal linkage in initial years of operations to meet shortfall in coal from allocated blocks, which normally take a few years to ramp up production and meet full fuel requirements of the end-use projects.

The life of fuel supply contract under tapering linkage is three years, which expires automatically as there is no provision for extension of the validity period.. The quantity of coal supplied in the first year is 75% of total requirement of the plant. The quantity reduces to 50% and 25% in the second and the third year, respectively.