Flexible coal linkage to yield savings for private power developers

By: | Published: May 17, 2018 4:10 AM

Private power developers have welcomed the government's latest decision to allow independent thermal power plants to transfer existing coal linkages to their nearest mines, although some feel that since savings on this account has to be passed on to discoms, there is not much they could gain.

coal india, coal india production, coal production, february dispatches, coal feb dispatchesCoal transportation has been one of the main impediments faced by the power sector.

Private power developers have welcomed the government’s latest decision to allow independent thermal power plants to transfer existing coal linkages to their nearest mines, although some feel that since savings on this account has to be passed on to discoms, there is not much they could gain.

The government on Tuesday approved the inter-ministerial task force’s recommendations on coal linkage rationalisation for private power plants, which, apart from yielding savings to power plants from lower coal transportation costs, might also ease railway infrastructure by reducing coal ferrying distance.

Ashok Khurana, director general, Association of Power producers, said this is a welcome move and would help reduce power tariffs. “Only those independent power plants where lower logistics cost improves their position in the merit order are likely to consider this,” said Kameswara Rao, leader, PwC India. Power plants with lower costs go up in the merit order list, which increases their chances of being selected by state-owned discoms for electricity procurement.

The process of transferring linkages also involves mutual agreement of multiple entities – power plants, Coal India subsidiaries and regulators – making the process complex and jeopardising the very objective of the policy, another expert, who did not wish to be identified, told FE.

Coal transportation has been one of the main impediments faced by the power sector. It is mainly triggered by inadequate transportation infrastructure and is seen to be driving up coal imports.

The option to rationalise coal linkages is already available to Central and state-owned power plants. The coal ministry in its annual report had informed that six state-owned power plants had rationalised less than 13 MT in 2017, resulting in estimated annual savings of Rs 774 crore in transportation costs.

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