Sale of power using captive coal only via bidding: Govt

SIDDHARTHA P. SAIKIA, THE HINDU BUSINESS LINE

Failing this, coal block would be de-allocated

NEW DELHI, JULY 6:
The Coal Ministry has made it mandatory for private power producers using coal from Government-allocated captive mines to sell electricity through competitive bidding. The producers will no longer be able to sell power in the merchant market.

“The Ministry has written to independent power producers to participate in the bids for sale of power or face cancellation of coal block allocation. This would be included as a condition in the allocation process retrospectively,” a source said.

The Ministry has issued the directive to independent power producers (IPPs) after it came to light that some developers were selling electricity at a much higher tariff and were not participating in bidding.

Mr Ashok Khurana, Director-General, Association of Power Producers, said, “The Coal Ministry should look at operational issues while enforcing this order. A power producer cannot change from a merchant to regulated model overnight. Moreover, it takes nearly a year to finalise a power purchase bid. At present, no such bid has been issued.”

“The power producers will have to participate in competitive bidding for sale of electricity. This means that the firms cannot quote a higher price as compared to projects based on linkage coal,” the source added.

Industry experts are of the view that these steps have been taken to check windfall gains to companies that have bagged captive mines. “In a way, this would offer guarantee of power offtake. There is always risk of offtake and fluctuations in a merchant model,” said an industry official.

However, there is no clarity on currently operating power plants that sell electricity in merchant markets. “Will they be shut till they finalise a power purchase agreement?” the industry official asked.

The Government is of the view that the benefits of electricity produced from cheaper coal sourced from captive mines must be passed on to the end-consumer. Currently, distribution companies seal power purchase agreements with producers who are selected after tariff-based competitive bidding.