Two years since the government allowed flexible utilisation of domestic coal under a tolling policy to reduce costs for generating power, only two states — Gujarat and Maharashtra — have come forward and signed power purchase agreements. The policy, if adopted fully, would have yielded annual savings of around Rs 10,000 crore to state-run power distribution companies (discoms).
In June 2016, the Ministry of Power allowed ‘linkage coal’ of a state-run generating station by any independent private power producer (IPP) for supplying power back to the same state discom. The power procurement process is done through the official ‘DEEP’ portal.
According to estimates of the Central Electricity Authority (CEA), state-run plants with combined capacity of 30,000 MW are more than 25 years old and are fit to be retired or retrofitted. These plants are operating at poor performance parameters, such as high heat rate, high auxiliary power consumption, and low plant load factor.
Besides, most of these plants are load-centre-based plants (i.e in close vicinity of the load demand centre) and located far from coal mines, leading to higher cost of transportation. Therefore, any super critical IPP located near coal mines of these state generating stations can utilise the coal with better efficiency and lower transportation cost.
All the plants in Punjab, Maharashtra, Andhra Pradesh, Telangana and Tamil Nadu are located at very far away from their respective coal mines and are currently operating at very high cost of more than Rs 3.5 /kwh.
A GMR Group spokesperson said, “At present, only Gujarat and Maharashtra have adopted the policy and are buying around 700 MW power from IPPs, and Gujarat has potential to buy more than 1000 MW. More states such as UP, Tamil Nadu, Karnataka, Punjab and Andhra Pradesh, which have power plants of more than 30-35 years old and are at a distance of more than 1,500 km from coal mines are expected to adopt the policy and benefit from the savings and thereby the consumers.”
Industry players believe that implementation of tolling arrangement on a larger scale will bring significant benefits to various stakeholders. Discoms will see reduction in the cost of power purchase, leading to significant savings.