In what would enable power companies to scale up capacity utilisation and cut fuel costs, public-sector Coal India has been told to provide the full contracted quantity of coal to them under the fuel supply agreements (FSAs) signed in 2011. Power and coal minister Piyush Goyal told FE, “It came to my notice a few days ago that the committed quantity (of coal) was not being provided (by CIL). It is grossly unfair to not fulfil commitments and hence I have just issued an order in this regard to CIL. The ministry has asked the company to fulfil their FSA commitments.”
The minister, who listed out the Modi government’s achievements in the power and coal sectors including the UDAY scheme for revival of debt-ridden state-sector power distribution companies “which is being monitored on a daily basis”, also said competitive bidding would be launched for procurement of wind power. The auction mechanism, already a norm in the coal and power sectors, has recently been successfully employed in the solar power sector, where the cost of power to consumers has reduced as a result.
While the FSAs required CIL to fully cater to power capacity of 78,000 MW, a 2011 presidential decree gave it leeway. The coal miner, which complained of difficulty in meeting the supply obligations, was allowed to limit the supplies to 90% of the above power capacity at 67% to start with, with a condition that the full capacity would be served as coal production picked up. However, as reported by FE earlier, many power companies have lodged complaints with the coal ministry in recent months saying that despite a big increase in coal production in the last two years, some CIL subsidiaries like SCCL showed no inclination to increase coal supplies to them; rather, it allegedly diverted the additional coal produced to the lucrative e-auction platform. A power company executive said that in some cases, power plants have been asked by CIL to arrange for their coal transportation from the mines for the quantity exceeding 75%.
While this works for pithead-based plants, it becomes unviable for those that are located, say, 100 km from these mines.
Goyal said that wind power developers have themselves requested that the bidding route be adopted for the sector. He added that since the move didn’t require any change in law, the bidding route of procuring wind power would soon be unveiled, modelled on solar power.
“Wind developers have been resisting bidding in the sector since inception. They have now realised, after the success of bidding in solar power, that a transparent system of bidding yields prices that are attractive for buyers, in what would expand the market for such power,” he said.
The wind power industry, the largest renewable energy sector in India with an installed capacity five times that of solar, has often resisted moves to replace cost-plus pricing with price discovery through competitive bidding.