Govt weighs competitive bidding for coal linkages

By: | Published: February 2, 2015 1:18 AM

After setting the ball rolling on coal block auctions, the government is now considering competitive bidding for coal linkages...

After setting the ball rolling on coal block auctions, the government is now considering competitive bidding for coal linkages as well, a departure from the practice of granting linkages based on recommendations of the standard linkage committee (SLC).

At the inter-ministerial committee’s (IMC) first meeting to discuss competitive bidding and letters of agreement (LoA), which are issued by Coal India (CIL) and its subsidiaries, it was decided that the coal major would appoint an external consultant to suggest bidding methodologies for different sectors.

“The terms of reference (for external consultant) could be to examine various structures and implementation models for auction of coal linkages/LoAs and other such market-based mechanisms and to recommend the optimal structure that would meet the requirement of all the stakeholders. It was decided that CIL be requested to engage such an external consultant at the earliest”, the minutes of the meeting of the first IMC noted.

The power ministry representative in the meeting suggested that the allocation mechanism for coal linkages should be able to pass on the benefit to consumers through tariff-based competitive bidding, but added that the prior commitment of 34,000 MW of LoAs, which have not been converted to fuel supply agreements (FSAs), would need to be fulfilled before new linkages are granted.

During the meeting, it was also proposed that the tenure of coal linkages to power sector be 20 years and for non-regulated sectors like steel, cement and captive power producers it should be restricted to five years. The department of industrial promotion and policy, however, said
the tenure for the non-regulated sector should be seven years.

Stream-mining
* At an inter-ministerial committee meeting, it was decided that Coal India would appoint an external consultant to suggest bidding methodologies for different sectors
* The power ministry representative suggested that the allocation mechanism should be able to pass on the benefit to consumers, but added that the prior commitment of 34,000 MW would need to be fulfilled before new linkages are granted
* It was proposed that the tenure of coal linkages to power sector be 20 years and for non-regulated sectors like steel, cement and captive power, it should be restricted to five years

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