Coal allocation to Thermal Power Plants (TPP) in India will henceforth be adequate and transparent as the Government of India has approved a new coal auction policy which eliminates the shortcomings of the earlier policy.
The Cabinet Committee on Economic Affairs (CCEA), under the Chairmanship of the Prime Minister, has approved a new coal allocation policy for the power producers in India, while, naming the policy as SHAKTI(Scheme for Harnessing and Allocating Koyala Transparently in India).
As per the mandates of the new policy, allocation of coal linkages for the power sector will be based on competitive bidding of tariffs, however, the central and state power generating companies are excluded, alongwith the exceptions enumerated in the Tariff Policy, 2016 will continue to rule. The new policy also allows signing of Fuel Supply Agreements (FSA) with the Letter of Assurance (LoA) holders.
The approved policy ensures all power projects with linkages are supplied with the entitled coal. In essence, auction and/or tariff based bidding will be the basis of allocation/grant of coal linkages to power producers in the country.
The following are the principal facets of the new SHAKTI coal allocation policy:
1. TPPs having LoA will be eligible to sign FSA after ensuring that its plants are commissioned, all milestones are attained, all specified conditions of the LoA are fulfilled within the stipulated timeframe, no adverse act is detected against the LoA holders, and TPPs will be commissioned before 31Mar’22.
2. TTPs, of 78,000 MW capacities, that could not be commissioned by 31Mar’15 will now on be eligible for coal allocation if the plants will be commissioned before 31Mar’22.
3. The actual coal supplies to all TPPs will be to the extent of the long term PPAs or medium term PPAs, to be conducted in the future.
4. The future coal linkages will be granted in accordance to the following criteria:
a) Central and state power generating companies will be allocated coal on the recommendation of the Ministry of Power.
b) The Independent Power Producers (IPP) will be granted coal linkages on auction basis pertaining to domestic coal. The participating IPPs in auctions will have to bid for availing discount on the existing tariff, which will be adjusted from the gross amount, at the time of billing.
c) For IPPs without PPA, the coal linkage will be based on auction, in which bidding for linkage will be done over the notified prices of coal companies. LoA will be issued to the successful bidders, and FSA will be signed after all terms and conditions of the LoA are met.
d)Linkages will be earmarked to the states, where any linkage quantity is unutilized for two years, will lapse. States may indicate the earmarked linkages to the distribution companies, which may: undertake tariff based competitive bidding on long and medium term PPAs and allot the linkages to successful bidders; or, assign the linkages to capacities that are covered under the exceptions and clauses of para 5.2 of the Tariff Policy dated 28Jan’16.
e) Power requirement of a group of states can be aggregated and procurement of power on tariff based bidding shall be made by a designated authority, which will be earmarked with coal linkages.
f) Linkages, for full normative quantity, will be granted for setting up Ultra Mega Power Plant(UMPP) projects.
g) Coal linkages for IPPs, having PPAs on imported coal, will be made available through a transparent bidding process.
BENEFITS
The new policy will entail remarkable benefits for the power producers. Coal will be made available to all power plants in transparent and objective manner. Power tariffs will become cheaper as auction will be the basis of allocation of coal linkages to IPPs.
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