Amid reports of rampant diversion of power from captive coal by user industries, the coal ministry has issued notices to a clutch of power companies warning them of cancellation of captive block licences if they continue to sell power in the free market.
These power companies, instead, will have to participate in competitive bidding for supply of electricity, the ministry has said.
The move comes in the wake of the Comptroller and General?s observation that private firms reaped windfall gains of R1.8 lakh crore between 2004 and 2009 from the government?s failure to auction captive coal blocks.
The move will impact profitability of about half a dozen companies including Jindal Steel and Power and its subsidiary Jindal Power, Tata Steel and Monnet Ispat Energy, which have been selling power from their commercial and captive power plants in the free market despite using coal from allocated captive blocks, according to industry experts.
?The developers shall participate in competitive bidding for sale of power. Therefore, sale of power in the merchant market is being disallowed,? the coal ministry said in a recent communiqu? to power companies holding captive coal blocks.
?If any developer does not participate in competitive bidding for power supply, the block will be de-allocated,? added the communiqu?.
Tariff quoted by power companies in competitive bidding cannot exceed tariff of power plants based on coal linkage from Coal India.
Jindal Power will lose the most from the coal ministry?s action. It has been selling its entire power output from the 1,000 MW Tamnar plant in Chhattisgarh through the merchant route. Jindal Steel and Power, Tata Steel and Monnet Ispat Energy have been selling surplus from their captive generating stations in the open market.
Sarda Energy and Minerals, Prakash Industries and Jayaswal Neco Industries too could see their profits slide due to the directive. The move is in line with the recommendation made by the power ministry earlier.
