How coal-power policy has unplugged independent producers

Over the last decade, India’s coal-based power generation capacity increased by nearly 2.5 times to 198 gigawatt (GW), courtesy an investment rush by the private sector, which now controls 47 per cent of the total coal-power capacity. The share was less than nine per cent in 2009.

Higher stakes should ensure more favourable terms for the private sector. But the reverse happened.

According to the Association of Power Producers (APP), Independent power producers (IPPs) are facing a double-whammy in the form of competitive bidding both for fuel purchase and long-term electricity sales to distribution utilities (DISCOMs).

In contrast, the public sector, led by NTPC, gets fuel at the price notified by Coal India (CIL) and sells electricity on a “cost-plus” basis to DISCOMs.

In a petition before the Delhi High Court, on February 4, the APP said that such discrimination is not merely against the original policy promises, but also against the November 2018 recommendations of a High-Level Empowered Committee, headed by the cabinet secretary.

The petition was filed challenging the constitutional validity of recently held linkage auction under the Scheme for Harnessing and Allocating Koyla (coal) transparently in India (SHAKTI) for utilities that did not have a PPA. Failure to secure a PPA within a stipulated time will cost IPPs the bank guarantee.

Mess created by UPA

The auction witnessed lukewarm response. Of the roughly 12 million tonnes offered by CIL, about half remained unsold. The rest fetched an average premium of 8.5 per cent. SHAKTI auction is not new and is part of the Modi government’s effort to rescue power plants which were stranded without PPAs or fuel supply agreements (FSAs).

The mess was created by the UPA government that went hyper-active in attracting private investment in coal power during 2005 and 2007.

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