Plants may get tapering linkage beyond 3 years

The Coal Ministry has decided to approach the Cabinet Committee on Economic Affairs to allow fuel supplies to power companies that are facing delays in developing their captive coal blocks.

Official sources said that the Ministry has decided to get CCEA nod to extend tapering linkages ‘beyond three years or till such time when coal production actually starts’ for such projects.

This proposal, if granted clearance by CCEA, would immediately benefit power plants of 4,350 MW being set up by Sterlite Energy, Chhattisgarh State Electricity Board, GMR Energy and Gujarat Mineral Development Corporation Ltd, a Coal Ministry official told Business Line.

Tapering linkage is a mechanism whereby coal is supplied on a temporary basis to power projects that have been allotted coal blocks but mining of which is yet to commence. This arrangement is monitored by the Standing Linkage Committee headed by Additional Secretary in the Coal Ministry.

Generally, fuel supplies based on tapering arrangement is provided only for three years (75 per cent in the first year; 50 per cent in the second year and 25 per cent in the third year).

This arrangement is to ensure that all project developers with tapering linkages are treated equally. “It would also mitigate the problem of power deficit in the country to a certain extent,” said the official.

However, the Coal Ministry has opposed the Power Ministry’s plea to convert some of the tapering linkages into long-term fuel supply agreements (FSA). “It would create additional demand of coal for an indefinite period, which Coal India would not be able to meet in view of heavy demand,” added the official. The Power Ministry informed the Coal Ministry that projects could not start mining in blocks due to delay in environmental clearances.

For instance, in 2006, the Mahan coal block was awarded to a joint venture between Essar Power and Hindalco Industries for captive use for their planned 1,200 MW and 900 MW projects.

The block was stuck for several years over regulatory differences on go and no-go area. Now, the block at Singrauli in Madhya Pradesh is expected to commence production only by the end of 2014.

Currently, the first unit of 600 MW of Essar’s power plant, attached to this coal block, is running on fuel bought through an e-auction by Coal India.

In addition, there are about 15 power projects with 10,785 MW and requiring 18 million tonnes per annum (mtpa) that have received tapering linkages.

Their captive mines are expected to be operational by March 2015. These projects are outside the 60,000 MW of power projects envisaged during the 12{+t}{+h} Plan period.

(This article was published on October 14, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.