The Confederation of Indian Industry (CII) has welcomed the Union Cabinet's decision to allow power companies to pass on the cost of imported coal to consumers of electricity.
In a statement, Anil Sardana, Chairman, CII National Committee on Power and Managing Director, Tata Power, said: "The decision taken by the Cabinet Committee on Economic Affairs to allow power companies to pass on the cost of imported coal to electricity consumers is indeed a welcome development and will benefit the 78,000-MW of capacity that is envisaged in the current plan period."
"While this may lead to a very marginal increase (15-17 paise) in the per unit cost of power, this move will ensure availability of power and will also prevent the creation of stranded capacity which currently are estimated at about 20,000 MW," Sardana added.
"This move is clearly a step in the right direction and reiterates the government's commitment to address the issues impacting the power sector. It is also hoped that the processes to get this aspect approved from SERC will be simple and transparent," Sardana further said.
Sardana was giving his response a day after the Cabinet Committee on Economic Affairs ( CCEA) approved the following mechanism for supply of coal to power producers:
(i) Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31.03.2015. Actual coal supplies would however commence when long term Power Purchase Agreements (PPAs) are tied up.
(ii) Taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65 percent, 65 percent, 67 percent and 75 percent of Annual Contracted Quantity (ACQ) for the remaining four years of the 12th Five Year Plan.
(iii) To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPPs) on cost plus basis. TPPs may also import coal themselves. MoC to issue suitable instructions.
(iv) Higher cost of imported coal to be considered for pass through as per modalities suggested by CERC. MoC to issue suitable orders supplementing the New Coal Distribution Policy (NCDP). MoP to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis and,
(v) Mechanism will be explored to supply coal subject to its availability to the TPPs with 4660 MW capacity and other similar cases which are not having any coal linkage but are likely to be commissioned by 31.03.2015, having long term PPAs and a high Bank exposure and without affecting the above decisions.
