Pvt power units wants SHAKTI coal auction deferred, cite liquidity crunch

During the last round in February, private power players had alleged that Coal India was offering less than the required amount of coal.
Private thermal power producers have expressed their reluctance to participate in the third round of the SHAKTI coal auction, slotted to be held next week, citing liquidity crunch. They have asked the government to return the bid security amount and processing fees paid by them.

The fresh round of auction is for those stressed power projects which have power purchase agreement (PPA) to sell power but no coal linkage. SHAKTI, or Scheme for Harnessing Scheme for Harnessing and Allocating Koyala Transparently in India, was launched in 2018 to provide coal to stressed power units which lack coal supply.
In the earlier two rounds held over the past two years, around 9,389 megawatt (Mw) of power capacity bid for the coal under the SHAKTI scheme. During the last round in February, private players had alleged that Coal India was offering less than the required amount of coal.
The units have now complained that the timing of the auction is misplaced. “It is inexplicable as to why the auction is being conducted so hastily, especially when the unprecedented situation due to the Covid-19 pandemic has created stress for the power producers. Revenue inflows from the power distribution companies (discoms) have dried up entirely and many of them are serving notices to the power producers to back down their generation,” said the Association of Power Producers (APP), in a letter to the office of Prime Minister, coal and power ministry.

Since India announced the lockdown on March 22, power demand has fallen as much as 30 per cent. This is coupled with several states backing down generation from several units, especially whose cost are high. All this has led to coal stock at power units and with Coal India in surplus of 30 days or more. Also, state-owned discoms have past dues totalling to a record high of Rs 90,000 crore to the gencos. The amount owed to private units is close to Rs 23,000 crore.

The private players, therefore, have asked the Centre to extend the timeline for the auction by “a month or till business normalcy returns.” It has said: “Bidders who have submitted their bid security and processing fees may be issued refund of these amounts so that these funds can be utilised for their day-to-day business operations.”

Senior Coal India executive said the firm was not conducting the auction and its role was to just provide coal. “Coal India’s role is limited to providing the source-wise quantity as requisitioned for the auction that it has already provided to the Power Finance Corporation, which is conducting the auction,” said the executive.

Sources in the government, however, said the auction was being held on the demand of the sector. “In the earlier round, the players had alleged Coal India is offering less coal under auction. Now, we decided to hold SHAKTI auction and all the other coal linkage auctions regularly. In such unprecedented times, the government is making coal available to all the sectors,” said a senior official.

Private players are calling this move as a means to get rid of surplus coal. As of April 30, there was 50.89 million tonnes of coal stocked up at the power houses in India, enough to last for 31 days. Coal India has a pit-head stock of about 76 million tonnes, said an estimate by the Central Electricity Authority (CEA).
Coal ministry officials said as coal availability is high, Coal India has shifted its focus away from production. “So there is no case of getting rid. Coal India is preparing ground for post-lockdown scenario,” said an official.
April onwards, Coal India has removed 114.43 million cubic meters of over burden in its open cast mines. This is 10 per cent more over last year same period. Removal of over burden (OB) involves the process of removing the top soil and rock to expose coal seams in open cast mines. Close to 95 per cent of Coal India’s production comes from open cast mines.

“As demand has fallen, Coal India has shifted its focus to the enhancement of the overburden removal. This would help Coal India to accelerate coal production whenever the demand picks up and supply without any delay,” said a senior coal ministry official.

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