Cabinet approves policy for coal block allocations
The Union Cabinet on Wednesday approved a transparent mechanism for coal allocations, securing supplies of the fuel for stranded power projects.
Allocation of such linkages will now be through an auction process, the Cabinet Committee on Economic Affairs (CCEA) decided at a meeting chaired by Prime Minister Narendra Modi.
Linkages are awarded to projects that do not have captive coal mines and need to source coal commercially from stateowned Coal India Ltd (CIL).
Of India’s power generation capacity of 326,848.53 MW, twothird or 217,492.26 MW is fuelled by coal
The plan for these coal linkages, through which projects get assured supply of the fuel at a discounted price, has been in the works for some time now.
“Coal linkages, for IPPs (independent power producers) having PPA (power purchase agreement) based on imported coal, shall be made available through a transparent bidding process,” a cabinet statement added.
This comes in the backdrop of a Supreme Court judgement that disallowed Tata Power Co. Ltd and Adani Power Ltd from raising power tariffs to compensate for expensive imported Indonesian coal.
“One of the biggest beneficiary of the policy will be projects with imported coal-based PPAs. This will provide an opportunity for them to migrate to domestic coal, thereby reducing their exposure to price vagaries of imported coal,” said Abhishek Poddar, a partner at consulting firm A.T. Kearney Ltd.
Earlier the process of select- ing companies that were assured coal supply was as subjective as the process for allotting captive coal blocks.
The NDA government reworked the regime, introducing coal mine auctions after the Supreme Court in September 2014 scrapped more than 200 coal field allotments.
“When the Supreme Court cancelled coal blocks in 2014, it was decided that the wealth should be distributed fairly and on that basis the coal blocks were auctioned and the profits were to be directed towards development and upliftment of the poor,” power, coal, mines and renewable energy minister Piyush Goyal told reporters. Experts welcomed the move. “A key provision of the policy is also to have auction for existing PPA holders based on discount to already prevailing tariff, which had built up huge risk premiums due to uncertainty around coal supply in the past. This would directly benefit the electricity consumers,” said Debasish Mishra, partner at Deloitte Touche Tohmatsu India LLP.