Govt defines coal auction for power plants without PPAs

By: |
Published: December 3, 2019 4:57:54 AM

The methodology paves the way for such units to apply for coal linkages, provided electricity produced from this coal is sold through spot power exchanges or through the government’s ‘DEEP’ portal, where bidding is conducted for bilateral short-term supply.

If it is found that a power plant has diverted this coal for other use, it will be barred from receiving coal through this policy for three years.If it is found that a power plant has diverted this coal for other use, it will be barred from receiving coal through this policy for three years.

The Union power ministry has formulated a methodology for conducting coal auctions for power plants without sufficient power purchase agreements (PPAs). The methodology paves the way for such units to apply for coal linkages, provided electricity produced from this coal is sold through spot power exchanges or through the government’s ‘DEEP’ portal, where bidding is conducted for bilateral short-term supply.

This move is part of the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (Shakti scheme), which was amended in March after the Cabinet Committee on Economic Affairs had approved certain recommendations of a high-level empowered committee (HLEC) constituted to address issues of stressed thermal power projects. The original version of the Shakti scheme allowed coal supply only to power generation capacities with long-term and mid-term PPAs.

According to the latest guideline, Coal India and Singareni Collieries Company will have to earmark mines for such auctions within the next 45 days. The said auctions would be held every quarter and the power company offering the highest premium over the notified coal price would sign fuel supply contracts.

The quantity of coal supplied through this route should help the plant run for three months, the government said. Winning bidders will have to intimate their lenders every month that the net surplus generated after meeting operating expenses are being used to service debts. If it is found that a power plant has diverted this coal for other use, it will be barred from receiving coal through this policy for three years.

“This would help commissioned projects with no coal to access coal and supply in short-term market and generate some cash flow,” said Ashok Kumar Khurana, director general, Association of Power Producers. “However, it would have been more beneficial if the same was also extended to existing linkage holders who cannot access coal for want of PPA as recommended by the HLEC.”

The Shakti scheme is seen as one of the major initiatives by the government which is hand-holding some power plants to come out of stress. Ten power plants with a cumulative 9,044 MW capacity had won 25-year coal linkages of 27.2 million tonne per annum in the first round of Shakti auctions held in September 2017, where bidders quoting the highest discount to existing tariffs were allowed to choose their preferred source of coal supply. Eight bidders with 875 MW capacity had won 2.97 MTPA in the second round of Shakti auctions held in May 2019.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Next Stories
1US-China trade deal possible before end of year: White House adviser
2‘Absolutely unfair’ to say government averse to criticism: Nirmala Sitharaman
3India Inc neither anti-national nor anti-government: Kiran Mazumdar Shaw