In a move to ease coal procurement, the Government of India (GoI) has asked the power companies, paying a premium of 40% for coal sourced under the special dispensation scheme started in 2013, to switch over to the E-auction mode, in which coal prices are relatively cheap.
The special dispensation scheme, under the Memorandum of Understanding (MoU) route, was introduced in 2013 in view of shortage in domestic coal supply. The GoI is of the view that the scheme is no longer relevant as abundant coal is being produced in the country now. The GoI has thus preferred to evolve a market-based mechanism for coal supply instead of binding fuel supply agreements with consumers.
Nearly, 8,000 MW of coal-based power plants have been sourcing coal under the scheme introduced in 2013. The GoI expects these power plants to source coal through E-auctions, in which approximately 8 MnT of coal will be offered every month.
Apart from participating in E-auctions, these power plants will soon also be able to participate in coal linkage auctions. It is also learnt that the cabinet is expected to clear this proposal within a short time.
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