No coal for needy power units

Even as Coal India’s production peaked in FY16 at 535 million tonne and stocks have piled up at pitheads, power stations with aggregate capacity of 8,000 mega watts (MW)…

Companies that get to receive non-coal mining leases under the new dispensation that allows transfer of leases not obtained through auction, will have to fork out 80% of the royalty additionally as transfer charges over the lease period. (Reuters)

Even as Coal India’s production peaked in FY16 at 535 million tonne and stocks have piled up at pitheads, power stations with aggregate capacity of 8,000 mega watts (MW) are facing the grim prospect of shutting down as their short-term fuel supply contracts with the PSU have just expired. Besides, another set of units with aggregate capacity of 22,000-MW capacity have yet to turn the letters of awards (LoAs) from CIL into long-term Fuel Supply Agreements (FSAs).

Among the power plants that could fail to honour their power purchase agreements (PPAs) with customers in the absence of clarity over fuel supplies from CIL are Adani Power’s thermal stations in Tiroda and Kawai, Bajaj Energy’s Lalitpur plant and KSK’s unit in Chhattisgarh.

The current scenario is in contrast to the one in 2013 when CIL was finding it difficult to sign FSAs, despite constant prodding by the government. It had struggled to accept the FSA obligations even in case of power plants with long-term PPA and slated to be commissioned before March, 2015. The government at that time identified two groups of plants with an aggregate capacity of 14,600 MW and asked CIL to supply fuel to them on a short-term MoU basis as they lacked LoAs from the company.


Of these units, those with combined (commissioned) capacity of 8,000 MW are equipped with PPAs but their fuel supplies are uncertain as the short-term contracts ended on March 31.

Power developers who FE spoke to expressed their concerns over the lack of coal linkages for these plants despite the creditable improvement in CIL’s production. Although the government has often said that it would now be auctioning linkages too on the lines of coal blocks, it has so far been able to come out with such a policy only for non-regulated user industries while the regulated power sector awaits clarity.

Back in 2013, apart from identifying plants for short-term supply contracts, CIL was also issued a presidential directive to sign FSAs with certain power plants holding valid LoAs. For this purpose, a list of power plants totaling around 78,000 MW capacity was finalized by the Central Electricity Authority (CEA) and approved by cabinet committee on economic affairs (CCEA). However, only about 58,000 MW of this capacity has been commissioned till date with around 54,000 MW having long-term PPAs and are therefore eligible to draw coal from CIL under FSAs.

“There are also some power plants outside these 78,000 MW units which fulfill the eligibility criteria for FSAs but are denied coal,” another industry source said. He added that there was need to have a more concrete and robust mechanism to tackle coal supply issues with CIL.

In July last year CEA prepared a list of units with aggregate capacity of 22,830 MW that have LoAs with commissioning date varying between FY17 to FY20. These LoAs have also not been converted into FSAs, creating uncertainty for units like Reliance Power’s plant at Butibori in Maharshtra.

Although, most of the central sector plants in this category are likely to be commissioned before 2020, there are several private sector plants that are facing financial issues leading to delays in or stoppage of the construction work. For instance, the second phase of RattanIndia Power projects in Nashik and Amravati have been classified as ‘unpredictable’ by the CEA along with DB Power project in Gorgi.

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