After reaching a consensus to auction coal linkages for the unregulated sector, the Coal Ministry now plans to offer future coal linkages to the power sector as well.

According to the minutes of the meetings of the inter-ministerial committee looking into the issue, the Coal Ministry has sought comments from the Power Ministry on a proposed auction methodology for the sector framed by SBI Capital.

According to the proposal, coal linkages will be auctioned by the State electricity distribution utilities (discoms) and the lowest bidder in terms of tariff will win to ensure that benefit of lower coal costs are passed on to the consumers.

The linkages are proposed to be given for a period of seven to 25 years with a strong preference given to the 25-year tenure, as it would help in having a long-term mine planning, rail infrastructure and power planning. SBI Capital’s proposed methodology has suggested that a single discom or a group of discoms will invite competitive bids and transfer the linkage to the winner.

It recommended that the discoms should arrange all clearances and invite the bids on a ‘plug and play’ basis. The proposals also recommended that Coal India Ltd should earmark a coal mine and Indian Railways should ensure evacuation infrastructure to ensure more bid certainty and lower tariff.

“The competitive bid can be conducted as modified Case I bid takes place where in the power plant can be located anywhere. Therefore, competing bidders may have different transportation, transmission and washing cost. Bidders would be required to quote separate figure for variable charge and fixed charge. Based on this, a levelised tariff would be used to select bidders with the L1 (lowest bidder) getting preference and so on. The list would be different for each discom,” SBI Capital recommended in its proposed methodology.

Cabinet approval

Meanwhile, a decision on auctioning of coal linkages for the unregulated sector is expected to get a Cabinet approval by early July. A senior Coal Ministry official said that comments have been received for the draft policy put out by the Ministry earlier this month.

At the meeting of the inter-ministerial committee held on June 4, a request from the Ministry of Steel to allocate coal linkages to Government and Public Sector Units, like in the case of coal block auctions, was rejected.

At the meeting, it was pointed out that this would distort competition as private sector shall have to bid for the linkages while public sector would be allotted the linkages.

Related Topics
comment COMMENT NOW