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Supply salve on cards for coal-starved firms

Companies that were forced to return allocated coal blocks will get a priority in supply from state-run Coal India, according to a senior official. The decision was taken at a recent meeting of the coal ministry.

According to a senior ministry official, some 41 coal blocks were de-allocated because of delay, including tardy progress in environment clearances. The companies to which these blocks were allotted to would require about 22.4 million tonnes of coal to run their plants.

Of this, 6.16 million tonnes each would be for power utilities and for captive power plants, 4.46 million tonnes for sponge iron plants and 5.63 million tonnes for cement plants.

In view of the coal shortage in the country, the ministry has decided to give top priority to plants whose supply volumes were reduced after blocks were allocated.

Supply contracts are automatically scaled down because plants are allotted blocks termed 'tapering linkages'.

Coal supplies under such linkages automatically stop after three to four years.

According to the official, next on the priority list will be plants that were granted tapering linkages after a coal block was allotted to them. Third on the list will be companies that held blocks as a consortium but their blocks were deallocated because the principal holder did not make adequate efforts to develop them.

In the second and third categories, priority will be given based on the extent of financial exposure of the companies as assessed and recommended by their respective ministries.

The coal ministry's meeting was attended by officials from the ministries of finance and steel, the Planning Commission and Coal India.

"The under principle shall be that preference would be given to the running plants. Independent power plants that come within this list are, however, being treated separately and they would be excluded from this list for the purpose of deciding the priority. This is expected to help ensure coal supply to sponge iron plants and cement plants that have not been granted any fresh coal supply contract since 2007. Captive power plants will, however, be excluded from this list, as 49% of the power generated by these units can be sold through open access and captive power plants can purchase power from open market through bidding," a CILBSE 0.10 % official said.

Source: The Economic Times