No allocation for power units till court case is resolved

Thu Sep 24, 2015 11:43 AM

The central government will not offer any coal blocks to the power sector till the court directive which disallows fuel pass-through costs gets resolved.

“In the next round of auctions, there will only be coal blocks for the unregulated sectors. We cannot offer mines to the power sector until the legal issue around the tariff (rate) regulations are resolved," said Anil Swarup, secretary in the coal ministry. As soon as the matter was resolved, these would be offered, he said, as “there is definitely a demand from the sector”.

In May, after the aggressive bidding to win blocks, the major power sector winners petitioned the high court here against a directive of the Central Electricity Regulatory Commission (CERC) on April 16. This had disallowed any pass-through of fixed cost on final power supply rates by the producers which'd won the blocks. This, the power companies said, was not informed to them during the auction.

The ministry of coal has maintained that the standard bidding document in the auction had disallowed any pass-through on the final rate, which “companies knew of and had bid accordingly”. The document also necessitated the mine winner to present its fixed cost details and final rate on the basis of the bid quoted.

The CERC directive restricts a higher energy charge by coal block winners, allowing only ‘downward revision’ of rates by it. “This would enable revision in tariff downwards, in accordance with provisions of power purchase agreements (PPAs),” went its directive. The case’s next hearing is early next month. The ministry of coal in its first ever e-auction of to producing mines, allotted 11 for end use power generation this February. To bag these, the power companies had together pledged a Rs 96,971 crore reduction in rates during the contract period for the blocks.

The ministry of power has decided to review existing PPAs of the coal block winners, to ensure the benefit is passed on to the consumer of the power sold from the plants attached to the mines. By the coal ministry's rough calculation, for every negative bid (all the winners had made negative bids) of Rs 100 per tonne, there would be a 6p reduction in the power rate.

(Courtesy: business-standard)

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