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The Power Ministry wants Coal India to allow power plants run by the same promoter to swap coal among the plants.
This means a company having projects at multiple locations is allowed to transfer or swap allocated domestic coal linkages amongst its own plants.
For instance, a private company which operates two units – one in Uttar Pradesh (with coal allocation from Eastern Coalfields Ltd) and another in Madhya Pradesh (with allocation from Northern Coalfields Ltd) – in order to cut transportation cost and time, can swap supplies.
The power plant in UP can buy from its nearest coal field and similarly the unit in Madhya Pradesh could source it from the mine that is near to the station.
“On October 11, the Coal Ministry has communicated the proposal to Coal India. The company would offer its views on the issue,” a Coal Ministry official confirmed to Business Line . The proposal was initially mooted by the Association of Power Producers (APP), a lobby for private power producers. Power Ministry and Central Electricity Authority (CEA) have agreed to the proposal and sent it to the Coal Ministry for vetting.
The Power Ministry in a recent communication to the Coal Ministry said that the coal mix optimisation may be allowed on ‘case to case basis for a limited period.’
“All the risk associated with this swap agreement would be borne by the power producer including less availability of coal for particular plant post coal mix optimisation,” a senior CEA official said.
The private power producers are eyeing this mechanism to reduce generation cost by cutting down freight charges and optimise plant performance. This would not require review of Power Purchase Agreement (PPA) or its tariff nor will it put any additional obligation on Coal India, they claim.
APP Director-General Ashok Khurana said that the idea is to rationalise coal movement. “It can actually save on coal transportation cost and time,” he added. The mechanism of coal mix optimisation, if implemented, would have no commercial or other impact on linkages allocated by Coal India, Khurana reiterated.
The Power Ministry has categorically told its coal counterparts that any such move would be allowed only after the power producer achieves all milestones under letters of assurance (LoA) for coal linkage, executed PPA and will not breach any existing terms with Coal India.
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