9,044 MW power units yet to be issued LoI 3-month after coal auction

Published On: 10, Dec 2017 | Source: financialexpress.com

Nearly three months after coal was allocated to 10 companies for producing 9,044 MW of electricity under a new ambitious scheme, none of the power producers has been issued the letter of intent due to bureaucratic hurdles. The Association of Power Producers, which represents the companies that were allocated coal linkages, has written three letters to Coal Minister Piyush Goyal and Cabinet Secretary P K Sinha since last month on “inordinate delay in issuance of Letter of Intent (LoI) by Coal India subsidiaries.” “Even after nearly three months, there is no clarity as to when LoI will be issued to the successful bidders,” the Association wrote to Goyal on December 7. Under the new scheme to provide coal to private power units having firm power purchase agreements (PPAs) to supply electricity to states at a pre-decided tariff but not having long-term coal supply, 27.18 million tonnes per annum of coal was allocated to the 10 plants through an auction. Coal India had conducted the auction for independent power producers with PPAs on September 11-12 where the bidder quoting a higher discount to its existing tariff would get the coal.

Adani Power, GVK Power, Bajaj Hindustan, GMR and Reliance Power quoted discounts in their power tariff in range of 1-4 paise per unit under the Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI).
The 27.18 million tonnes per annum with tariff discounts going up to 4 paise per unit was “expected to result in an annual generation of over 47 billion units per annum from the linkage coal and a savings in tariff of approx Rs 125 crore per annum for period up to 25 years,” according to an official statement issued on September 15 after the auction. “In the auction scheme, it was envisaged that LoI will be issued by CIL subsidiaries within 15 days of conclusion of auction,” the Association wrote. Once LoI was issued, the power producers were to amend the PPAs within 45 days to reflect the discount they had quoted in the auction and arrange for approval of the electricity regulatory commission. Thereafter, Coal India Ltd (CIL) had 30 days to sign Fuel Supply Agreements (FSAs) with the successful bidders.

“Thus, the coal supply was expected to commence within 90 days of conclusion of auction,” the Association said adding most of the power producers who had depended upon this linkage auction now face impossible task of arranging coal supplies for immediate operations beyond December 2017. “The situation is compounded by absence of any Special Forward e-Auction from CIL subsidiaries in last four months, which was being used by these power producers to source their coal requirements as a stop gap arrangement till coal linkage auctions was carried out,” it wrote.

The 10 plants, it said, will have to “shut down/curtail their operations for want of coal from January 2018 onwards, thereby creating more financial stress to its stakeholders and lenders.” “Even the distribution companies, which would have benefited with the discounts discovered through a transparent bidding process under SHAKTI 2017, would now be forced to procure power at higher prices to bridge shortage of power supply under the PPAs,” the Association said seeking expeditious issuance of LoIs.