In the backdrop of high demand for power and insufficient coal supply, the Ministry of Power has issued directions that all the imported coal based power plants operate and generate to their full capacity while also instructing the states that the price of coal should be a “pass through” to share the burden of high cost of imported coal, which has rendered some of the generation companies non-functional.
Only 10,000 MW out of the total 17,600 MW imported coal based capacity is currently functional. As per the instructions, a committee under the Ministry of Power will decide on the pass through mechanism of high imported coal cost to the power purchase agreement (PPA) holders. The rates decided by the committee will be reviewed every fifteen days. The instructions issued will remain in force till October this year. Some of the major imported coal based plants in the country include Coastal Gujarat Power Ltd., Adani Power Mundra Ltd. (Phase I, II and III), Essar Power Gujarat Ltd., JSW Ratnagiri Ltd. and Tata Trombay Ltd., among others.
According to the power ministry’s directions to the generating companies under the Electricity Act, 2003, all imported coal-based power plants shall operate and generate power to their full capacity. “Where the imported coal based plant is under NCLT, the evolution professional shall take tips to make it functional,” the ministry circular on the issue said.
The government also outlined the flow of the power supply thus generated. “These power plants will supply power in the first instance to the PPA holders. Any surplus or any power for which there is no PPA will be sold to power exchange. Where the plant has PPA with multiple discoms, power will be offered to PPA holder and any remaining quantity will be sold through the power exchanges,” the ministry said.
“Considering the fact that the present PPAs do not provide for pass through of present high cost of imported coal, the rates at which the power shall be supplied to PPA holder shall be worked out by a committee constituted by Ministry of Power with representative from the ministry, Central Electricity Authority and the Central Electricity Regulatory Commission (CERC), the instructions said.
This committee will ensure that the benchmark rates of power meet all the prudent costs of using imported coal for generating power including the present coal price shipping cost, the ministry said. “Where the 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 above rates shall be made to the generating company on a weekly basis,” the ministry added.
In case a state is not able to enter into mutually negotiated rates or is not willing to procure power at the benchmark rate worked out by the committee or is not able to make weekly payment, then such capacity will be sold to the power exchanges. “The net profit if any by sale of power which is not sold to the PPA holder and is sold to in the power of changes shall be shared between generator and PPA holder in the ratio of 50-50 on monthly basis,” said the ministry.
There has been an unprecedented rise in international coal prices. This has led to losses for the power generators running imported coal based plants and supplying power to PPAs without the cost escalation clause. The generators were therefore not willing to run the plants.
