Coal news and updates

Tariff-based bidding likely for future coal linkages

The government is looking at auctioning coal linkages — supply quota from mines — for future power stations through states via tariff-based bidding route. But industries in unregulated sectors, such as steel and cement where product price is market-determined, would have to compete for linkages in forward auction wherein the highest bidder would be the winner.

Top coal ministry officials said existing linkages to power stations would continue and would not be brought under the purview of auctions. "Under the present linkage system, a power plant may have FSAs ( fuel supply agreements) with multiple mines. Besides, the tariffs in PPAs (power purchase agreements) are based on linkage prices. There will be chaos if all the FSAs and PPAs have to be reworked," one official said.

But the existing linkages to steel, cement and other user-industries in the unregulated sector are likely to be brought under auctions and the users would have to compete for them.

Under the proposed linkage auction regime, states that plan to set up power stations would approach the Centre, which after due diligence would sanction the supply source. This way, the quality, price of coal and transportation costs would be frozen for the project. All these factors have direct bearing on power tariff.

Once these factors are frozen, states would be asked to call for tariff bids from promoters and the company offering cheapest electricity would get the project. "This way, the benefit of assured coal supply cannot be retained by the promoter and it gets passed on to consumers," the official said.

source: http://timesofindia.indiatimes.com