Firms must bid to sell captive coal power: Moily

Written by fe Bureau | New Delhi | Updated: Sep 13 2012, 09:56am hrs
Veerappa MoilyVeerappa Moily, Power & MCA minister
The power ministry has framed new bidding guidelines to prevent private firms with cheap captive coal mines selling power at steep rates in the open market and reaping windfall profits. Speaking at the Idea Exchange programme of the Express group, power minister Veerappa Moily said the guidelines would require companies in all segments ultra mega, captive and merchant generating power to participate in bidding for selling electricity.

The minister said there would be no large-scale coal block cancellations, assuring the money lent by the banks to power companies would be safe. Moily said the new bidding guidelines would resolve the immediate problems in the coal and power sector.

The power ministry has put up the revised power bidding document on its website. There is no question of passing on the windfall profits to these people (corporates). If at all windfall profits have to go, these will go to the consumers. These will apply to all producers, Moily said.

There are other checks and balances (in place). Just because the coal is allocated to these power producers, it does not mean they (corporates) can utilise it as they will. Before the coal is taken up, they have to enter into a certain agreement. Even for selling power, they must go through competitive bidding, he added.

The new bidding norms will cover even those who generate power from captive mines. Thus, it will be applicable to Jindal Powers 1,000 MW Tamnar power plant in Chhattisgarh. The Naveen Jindal-promoted company bagged the captive mine in 1998 and is recently in the news over allegations that it made windfall gains by accessing cheap coal and selling power at higher tariffs in the open market.

For example, during April-June, Jindal Power earned a net profit of Rs 314.39 crore on revenues of Rs 750.45 crore, which translates into a profit margin of 41%. During the same period, NTPCs profit margin stood at 15%, which is close to the industry norm.

The company has denied all allegations and said that its higher profits is due to its efficiency.

Other firms who have been allocated captive blocks but are yet to commission associated power plants are Tata Group, Essar, JSW Group and Abhijit Group.

The ministrys move comes at a time when the government is battling the political fall-out of the Comptroller and Auditor Generals observation that private companies reaped windfall gain of Rs 1.86 lakh crore from the allocation of coal blocks without auction between 2006 and 2009.

A total of 17 billion tonnes of geological reserves of coal were allocated to companies in the power sector through the captive route. This can fire more than 1 lakh MW generation capacity, which is equivalent to half of the countrys installed capacity, according to industry experts.

As per the national tariff policy, power companies are required to participate in tariff bidding and sign long-term power purchase agreement (PPA) with discoms for sale of power.

Moily said his ministry is working to reduce transmission and distributions losses in states, which are as high as 45% as against the national average of 27%. He said the government has prepared a debt restructuring proposal of Rs 2 lakh crore plus for the sector. This plan has been approved by all the concerned ministries and will now be taken up by the cabinet.