Coal news and updates

A government plan to get stranded power projects moving through coal supplies is meant to benefit consumers and not any private company. It would also not come at the cost of existing projects with firm coal supply agreements or letters of assurance from Coal India Ltd, a government official said. 

 

Responding to a TOI report on Monday, the official clarified that there would be no windfall gain or any other benefit to private companies or state-run entities since the plan envisages supplying coal to them on pass-through basis, where any benefit of cheaper fuel is passed on to consumers by way of lower tariff. 

 

The plan envisages granting linkages - supply allotment from Coal India mines - to the stranded plants with a combined capacity of 18,000 mw in the public and private sector. Some 10,000 mw belongs to private sector and 8,000 mw is in the public sector, including projects of central generator NTPC, MAHAGENCO, Karnataka Power Corporation Ltd and APGENCO. 

 

Besides, CIL's supply agreements would not have any penalty clause. In other words, CIL would supply coal to plants under consideration only if it is left with additional coal after meeting its commitment to existing customers. Rather, the plan is to raise allocation to post-2009 plants and ensure that allotments to units that have come on stream before 2009 are not affected. 

 

The plan being discussed in government provides that linkages from Coal India will be given only to generators that sign long-term power purchase agreements with state utilities. The official said the coal ministry is also on board and has helped improve the plan. 

 

The move is aimed to avoid burdening consumers with higher tariff accruing from increase in IDC, or interest during construction, which is to be passed on to consumers. So the longer they remain stranded, higher their IDC, which would ultimately push up tariff. Providing coal linkages would avoid such a scenario, enabling plants to start production and thereby reduce pressure on bank finances. 

 

The government official said none of the companies which allegedly benefited from Coalgate will be entitled to supplies. Source said there was already a decision that bars the government from allocating coal to companies that are facing investigations related to the scam. 

 

Government officials also disputed the calculations in the report, arguing that the price of coal sold by Coal India varied between Rs 400 a tonne to over Rs 4,000 a tonne, excluding royalty and other charges. Similarly, a source said, the price differential between imported and local coal also depended on the grade of the fuel used as well as the location of the plant, since generating stations near the coast were better off using imported fuel. 

 

There are some companies that have letters of assurance from Coal India but have not been able to sign fuel supply agreements. This is due to their failure to meet the project timelines, an official said, adding that plants envisaged under the government plan are all part of the 12th five-year plan (2012-17) projections and others are slated to come up in the next plan period.

 

 

Source: ToI