Power plants without long-term linkages won't get benefits

By : Sudheer Pal Singh
Last Updated: Fri, Feb 08, 2013 04:10 hrs

Coal-based power plants with 16,000 Megawatt (Mw) capacity, entailing an investment of more than Rs 80,000 crore, are unlikely to get the benefit of coal price pooling. The coal ministry has said these projects would be kept out of the pooling mechanism, since they came up without any firm long-term linkage from Coal India Ltd (CIL).

These projects were supposed to come up between April 2009 and March 2015. Some of these have already been set up. “It is not known how such plants have come up without any assurance of coal. Nevertheless, in the present scenario of coal shortage, when CIL is not in a position to meet even its fuel supply agreement (FSA) commitments, such power plants may not be considered for the pooling mechanism,” the coal ministry is understood to have said during the latest round of discussion on pooling. A note on pooling, floated by the coal ministry, was discussed by the Cabinet on Tuesday before giving its in-principle approval to the scheme.

Coal price pooling has been under work to make costly imports of the fuel viable. Imports have been on a rise owing to stagnant production by state-owned miner CIL. Under the pooling mechanism, domestic and imported prices of coal will be averaged to allow consumers to avail uniform rates irrespective of the fuel source. The cost differential will be recovered by across the board increases in CIL prices to linked consumers.

The discussions held so far on pooling have thrown up four possibilities. One, covering supply for 60,000 Mw capacity coming up in the 12th Plan period. These plants figure in the CEA’s list of company capacity. Two, including plants not figuring in the list but likely to be commissioned before March 2015 after achieving milestones (7,000 Mw). Three, including plants which have been granted tapering linkage (11,000 Mw). And, four, plants which are likely to come up before March 2015 but with neither long-term linkage nor tapering linkage (16,000 Mw).

While the power ministry had suggested a limiting price pooling benefit in the immediate future to the first two options, the coal ministry proposed adding the third option, too, as a tapering linkage is a legally enforceable contractual obligation. However, the coal ministry is not in favor of covering plants under the fourth option (without any linkage) under the price pooling net. An email to the coal ministry was not replied to.

A total of 90 power stations with more than 35,000 Mw capacitywould be commissioned or are likely to be commissioned between April 2009 and March 2013. This capacity would require a cumulative 149 MT of coal for operation.

Of this, 22 mt will be supplied as imports by CIL. Details of the plants likely to come up without assured coal supply, out of the total 90 power plants, were not available.

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