Power companies with plants in eastern India seem poised to supply electricity to contracted buyers at tariffs that comprise only the fixed cost and can be fully realised even at suboptimal capacity utilisation, going by the outcome of the coal block auctions since Saturday, reports Sumit Jha in New Delhi.
Among the seven blocks reserved for the power sector in the first lot of operational mines, three have been put on auction so far and in all cases, the initial process of reverse bidding — which means the bidder quoting the lowest amount as fuel charge will win — has been turned into one of forward bidding with a reserve price of R100 per tonne fixed for the respective state’s revenue serving as the floor.
While some analysts were sceptical about the viability of the model, sources said bidders apparently saw headroom from savings expected in transportation cost, better operational efficiency to be achieved from employing private mine development operators (MDO) and, more important, the option to sell 15% of the power in the open market.
GMR Chhattisgarh Energy grabbed Talabira-I block in Odisha on Saturday at a price of Rs 478 per tonne and CESC, the flagship company of the RP-Sanjiv Goenka Group, won the Sarisatolli mine in West Bengal for Rs 470 per tonne. In both cases, the initial lowest (reverse) bid had come in at zero. On Monday, the initial price quoted under reverse bidding for the Trans Damodar block in West Bengal, the third block auctioned to the power sector, was Rs 500 a tonne but in subsequent rounds, aggressive bidding saw the price hitting zero, leading to forward bidding as in the previous two cases. At the time of going to press, the highest bid was ruling at Rs 528 a tonne.
Experts, however, reckon that zero fuel charge could be exclusive to power plants in eastern India due to their proximity to coal mines, as the high logistical costs for fuel likely for units in southern and western India won’t allow such aggressive bidding.
Kameswara Rao, leader, energy, utilities and mining, PwC India, said, “The thermal plants located in southern and western states that are far away from mines have chosen to rely on Coal India’s fuel supply and refrained from bidding as the margin available may not be sufficient to cover logistics risk. They may also find imports attractive. I believe developers are taking into account the logistics cost, supply risk, and optimisation opportunities as they quote zero fuel charge.”
“Sustainability could come from margins available in other components of tariff,” a government official told FE, when asked about the aggressive bidding by power developers.
Among the other two blocks auctioned on Monday, Marki Mangli-III block in Maharashtra, reserved for sponge iron and captive power, was bagged by BS Ispat at Rs 918 per tonne, while bidding was on for Mandla North reserved for the cement sector. At the time of going to press, the highest bid for Mandla North was Rs 2,329 a tonne, much higher than the floor price of Rs 1,271 per tonne.
