Coal news and updates

The Cabinet Committee on Economic Affairs has referred a proposal to auction coal linkages for the power sector to a Group of Ministers.

 

While it was widely expected that the proposal will be approved on Wednesday, the government decided to refer the same to a group of ministers.

 

The Coal Ministry has been working on a mechanism to auction coal linkages to power plants since 2015 and had engaged the help of SBI Capital Markets to develop a model.

 

The policy was to be applicable both for existing power plants already operating with linkages and new power plants.

 

According to the proposal, existing power plants, with power purchase agreements but no coal linkage, will be able to win the auctions on basis of a premium over the Coal India notified price which would be passed on to consumers by reducing existing electricity tariffs.

 

Coal linkages for new power plants are proposed to be auctioned by State governments/State electricity distribution utilities (discoms) and the lowest bidder in terms of electricity tariff will win to ensure benefit of lower coal costs are passed on to the consumers. In May, the Cabinet had also approved a policy allowing for flexible use of coal linkages by State governments and power plants. Under the new policy, all the long-term linkages of individual state-government owned power generating stations shall be clubbed and assigned to respective States/State-nominated agencies.

 

If the State government wants to deploy the coal linkage to a private sector power plant, an auction will be held amongst the competing private sector plants where the source of coal, quality of coal and quantum of power and delivery point for the receipt of power shall be indicated upfront.

 

Similarly, for central government power generating stations, the coal linkage shall be assigned to the company which owns the station. Both State governments and the Central government power generating companies can then choose to allot the coal linkage amongst their generating stations. Here, the criteria for use of coal linkage will be plant efficiency, coal transportation cost, transmission charge and overall cost of power.

 

The methodology of the auction of coal linkages to private sector power plants was taken up for consideration by the Cabinet Committee on Economic Affairs on Wednesday.

Source: The Hindu Business Line