Tariff-based bidding made must for certain power firms

The coal ministry is learnt to have made it mandatory for independent power producers holding captive coal blocks to participate in tariff-based bidding for the sale of power.

The move is aimed at curbing profiteering by a select few companies who were allegedly engaging in merchant market sales of power generated using cheap coal produced in blocks. The ministry has asked eight state governments to add a clause to this effect in the coal mining leases granted to companies, according to sources. The clause states that such companies would sell power from their end-use plants to distribution companies through competitive bidding and enter into long-term power purchase agreements (PPAs), otherwise the permission to mine coal might be withdrawn or suspended.

In cases where the plant has been commissioned or is likely to be commissioned in 18 months, and the coal block has start producing, the firms would have to sign PPAs within 18 months. In cases where the block is yet to come into production, companies would have to sign PPAs at least six months before the end-use plant comes on stream.

The ministry had earlier sought views on the issue from its power counterpart and the law ministry. The imposition of such a condition now in allotment letters either being granted or have been granted is learnt to have been found to be legally tenable. The original allotment letters issued to captive miners had no conditions attached. The letters did not specify whether the companies are free to sell power through PPAs or in the merchant market.

So far, around 30 captive coal blocks allotted to over 22 companies have started production. The coal ministry has issued the fresh directions to the governments of Chhattisgarh, Odisha, West Bengal, Jharkhand, Madhya Pradesh, Maharashtra, Rajasthan and Gujarat.