The Hindu Business Line : 15 coal blocks spotted for merchant power units

In order to give a fillip to the development of merchant power plant and large-sized captive stations, the Centre has identified 15 coal blocks with an estimated reserve of 3.6 billion tonnes to be earmarked specifically for these projects.

The Government, through State-owned Power Finance Corporation (PFC), is organising a conference on development of merchant plants with prospective private sector developers on January 16.

Scouting for site

The Central Electricity Authority (CEA) and PFC have already been asked to scout for around 24 sites across various States, where merchant power plants having capacities of 500-1000 MW can be set up. The Centre is targeting an incremental capacity addition of around 15,000 MW from these stations over the next four years or so, as an interim measure to plug the power demand gap, Government officials said.

An `in-principle' decision to allocate coal linkages, including captive coal blocks, to merchant power plants with capacities in the range of 500-1000 MW and large captive units has also been taken, Government officials said.

Of the coal reserves of 3.6 million blocks identified by the Union Power Ministry, in consultation with the Ministry of Coal, blocks aggregating reserves of about 2.4 billion tonnes would be considered exclusively for merchant plants. In order to decide the eligibility for coal block allotment, the Centre plans to lay down certain normative criteria for merchant plant developers.

These criteria could relate to net worth of the parent company on whose balance sheet the merchant power plant is proposed to be set up, its internal resource generation and annual turn over, according to officials.

The Centre also plans to extend assistance in terms of land acquisition and environmental clearances, besides transmission linkages to the grid.

While captive plants are meant for meeting in-house demand for power of the promoter, with the option of selling surplus to the grid, merchant plants are stations that do not tie up their output for a particular buyer through long-term PPAs (power purchase agreements) but instead are free to sell the generated electricity to any consumer on a spot basis, short-term or long-term basis.

The Power Ministry, which is looking at merchant power plants to provide the additional generating reserves that the country requires in the near future, plans to dole out incentives to generate certain degree of comfort for promoters in lieu of the high risks that they are faced with. These include a full market risk since promoters have to compete for customers and there are no guarantees on a minimum off-take of their output.