Macro Economy

Coal block de-allocation: Power Ministry eyes the fuel supply agreement route

| Updated on: Oct 27, 2014

Moves Cabinet note to ensure 90% fuel supply

To ensure continued fuel supply to coal-based power plants, the Ministry of Power has floated a Cabinet note seeking approval to meet requirements of generators whose linked blocks are to be de-allocated by March 31, 2015.

The Cabinet note, seen by BusinessLine ,states the Ministry has sought approval to meet 90 per cent of coal requirement of such plants by signing fuel supply agreements to keep them running at 85 per cent plant load factor. This would include plants constructed after 2009. There is also a proposal to convert tapering linkages of three years into full time linkages of 20 years.

The note recommends that the Ministry of Coal should sign fuel supply agreement to meet the requirements of projects aggregating 4,700 MW.

The proposal does not cover plants where only a Letter of Assurance has been signed.

For such plants, the Power Ministry proposes to allow imported or e-auctioned coal with the pass through in costs to be determined at the appropriate electricity commission. In the event of a shortfall in coal supply, the note recommends pooled prices of domestic and international coal. The proposals, if accepted by the Cabinet Committee on Economic Affairs, is expected to benefit 25,000 MW of capacity in the private sector and help electricity generators like Adani Power, Tata Power, Jindal Steel and Power Ltd, Reliance Power, Essar, GMR, GVK, among others.

Published on November 25, 2017

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