Mechanism for coal supply to power producers approved by CCEA

The Cabinet Committee on Economic Affairs (CCEA) has approved the following mechanism for supply of coal to power producers:

• Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31.03.2015. Actual coal supplies would however commence when long term Power Purchase Agreements (PPAs) are tied up.
• Taking into consideration the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65%, 65%, 67% and 75% of Annual Contracted Quantity (ACQ) for the remaining four years of the 12th Five Year Plan.
• To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPPs) on cost plus basis. TPPs may also import coal themselves.
• As suggested by CERC, higher cost of imported coal to be considered for pass through. Ministry of Coal to issue suitable orders supplementing the New Coal Distribution Policy (NCDP).
• Ministry of Power to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis.
• Mechanism will be devised to supply coal subject to its availability to the TPPs with 4660 MW capacity and other similar cases which are not having any coal linkage but are likely to be commissioned by 31.03.2015, having long term PPAs and a high Bank exposure and without affecting the above decisions.

Why this mechanism?
This mechanism has been devised to enable import of coal by CIL in order to meet the shortfall in the domestic coal requirement of the TPPs from time to time. Earlier, the CCEA had suggested certain guidelines for import of coal on cost plus basis/pooling of prices and also directed formation of an Inter-Ministerial Committee (IMC) to consider the cases of power plants with aggregate capacity of about 16000 MW which would be commissioned by 31.03.2015 but are not having any linkage for supply of coal. On the basis of the recommendations of IMC, the matter was further considered by CCEA. The CCEA inter-alia directed to consider the feasibility of higher cost of imported coal being allowed as a pass through in case of PPAs signed on competitive bid basis.

Month: Current Affairs - June, 2013