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As the country’s coal and power supply situation becomes a cause of concern, the Power Ministry has read the riot act on the imported coal-based (ICB) power plants directing them to start operations.
The Power Ministry has invoked Section 11 of the Electricity Act, which allows the government to order a Genco, in extraordinary circumstances, to operate and maintain any generating station in accordance with the government’s directions.
In a letter to states on Thursday, the Power Ministry said the demand for power has gone up by almost 20 per cent in energy terms, and the supply of domestic coal has increased but is not sufficient to meet the increased demand for electricity. This has led to load shedding in different areas. Due to the mismatch in daily coal consumption and receipt, the stocks at power plants have been declining at a worrisome rate.
Click here to read the complete list of Power Ministry’s directions
Exorbitant coal prices
The international coal price has gone up exorbitantly and is currently hovering around $140 per tonne. As a result of this, the import of coal for blending has gone down.
“The imported coal based (ICB) plant capacity is around 17,600 megawatts (MW) and PPAs for ICB plants do not have adequate provisions for pass through of the entire increase in the global rates. At the present global rate, running ICB plans and supplying power to PPA holders will lead to huge losses for generators, and therefore, these plants are not willing to run,” it added.
The Ministry has already instructed domestic coal-based (DCB) plants to import 10 per cent coal for blending. Also, to ensure all ICB plants are functioning, the Centre has advised states that the higher price of coal should be a pass through. Most states have done that and about 10,000 MW capacity has started operating.
All imported coal-based power plants shall operate and generate power to their full capacity. Where the ICB plant is under NCLT, the resolution professional shall take steps to make it functional. These plants will supply power in the first instance to power purchase agreement (PPA) holders, and surplus power can be sold in power exchanges.
If the plant has multiple PPAs with Discoms, in that case, if one Discom does not schedule any quantity as per its PPA, then power will be offered to other PPA holders. In case there is surplus power, then it can be sold in power exchanges, it added.
“Considering the fact that the present PPAs do not provide for the pass through pf the present high cost of imported coal, the rates at high the power shall be supplies to the PPA holders shall be worked out by a committee constituted by the Power Ministry with representatives from Power, CEA and CERC. This committee shall ensure that benchmark rates of power so worked out meet all the prudent costs of using imported coal for generating power, including the present coal price, shipping costs and O&M costs, etc and a fair margin,” Power Ministry said in the letter to states.
Where generators/group companies own coal mines abroad, the mining profit will be set off to the extent of the shareholding of the generating/group company in the coal mine. The PPA holders shall have an option to make payment to the generating company according to the benchmark rate worked out by the group or at a rate mutually negotiated with the generating company.
Payment at the rates decided shall be made by the Genco on a weekly basis. When any Discom/state is not able to enter into mutually negotiated rates with the Genco and is also not willing to procure power at the benchmark rate worked out by the committee, or is not able to make weekly payment then such quantity of power shall be sold in the power exchanges, the ministry said.
Net profit, if any, by sale of power which is not sold to the PPA holder and is sold in the power exchanges shall be shared between the Genco and PPA holder in the ratio of 50:50 on monthly basis.
Benchmark rates worked out by the committee shall be reviewed every 15 days considering the change in the price of imported coal, shipping costs, etc. This order shall remain valid till October 31, 2022.
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