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AUG 18 2014

Government proposes to ensure coal supplyto each existing and upcoming power plant commissioned before April 2017

  • Economic Times, ET Bureau / Hyderabad
  • Created: Mon 18th AUG 2014

The government is considering aproposal to ensure the supply of fuel to every coalfired power plant, as itaims to revitalise an industry that is key to the economy but is now grapplingwith fuel shortages. The power ministry proposal is in line with financeminister Arun Jaitley's assurance in the Union budget, and covers existing andupcoming plants that would be commissioned before April 2017, a senior ministryofficial said.

It covers projects with orwithout fuel tie-ups, as well as those with captive coal mines that have beencancelled or delayed. State-run monopoly supplier Coal India can meet theadditional requirement of the dry fuel through imports, the official said. Itcan realise the additional cost on imports by pooling in imported coal withdomestic fuel and supplying it to new power plants without firm fuel contracts,he added. "The move aims at operating all coal-based power plants atsustainable levels to avoid financial burden on companies, banks and theeconomy and sending positive signals to investors," he said.

As per the ministry's assessment,existing and upcoming power plants of 12,000 MW without coal tie-ups will leadto an annual revenue loss of Rs 32,000 crore. The proposal, if implemented,will immediately benefit idled coalbased generation capacity of 7,230 MW andanother 10,930 MW that is likely to be commissioned before April 2015.

It seeks to offer 50% coal supplywithout any premium to projects with captive mines that have been delayed orcancelled due to reasons that are beyond the control of the developers.Currently, Coal India charges up to 40% premium for supply to such plants. Thepower ministry has proposed to provide coal to projects with letters ofassurance from Coal India at 60% of the requirement. It has also sought fuelsupply pacts for plants which don't have such assurance letters at 50% of theneeded quantity, but without any penalty clause for non-supply or not liftingthe accepted quantity.

Projects that do not havemedium-or long-term power purchase agreements with states will be given coal atnon-concessional prices. Such plants aren't considered for coal supply untilnow. The proposal is subject to increased production by Coal India and doesn'taffectexisting fuel supply pactssigned by the company for plants with 78,000 MW of capacity. The coal ministryis making efforts to increase Coal India's production by easing environment andforest clearance procedures. The proposal will not cover power plants that aredeveloped with a plan to operate full on imported coal.

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Coal India

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