Coal mining opens doors to pvt players; power distribution fails to reform

While one end of the power supply chain flourished, at the other end of power distribution it was a year of crisis
The coal industry this year saw a historic turn of events with private companies entering the arena of commercial mining and sale – 47 years after the sector was nationalised in India. 

The Centre amended the Coal Mines (Special Provisions) Act, 2015, in May to open up auction for non-mining firms; micro, small, and medium enterprises; and foreign companies.

The two-part auction concluded last month when companies submitted their technical bids for 19 of the 38 coal blocks on offer.

Among the winning bidders were Adani Enterprises, Hindalco, Vedanta Ltd, Essel Mining of the Aditya Birla Group, Jindal Steel & Power Ltd, and several new and non-mining companies such as Aurobindo Realty, Yazdani International, JMS Mining, and Boulder Stone Mart.

Coal ministry officials said almost 65 per cent of the bidders were from the “non-end user” category, i.e. they are not direct coal users.

It has been estimated by the Ministry of Coal that these 19 mines will generate revenues of Rs 6,636 crore annually over their lifetime. The upfront amount expected is Rs 1,048 crore.

“The success of commercial mining has paved the way for opening up coal markets and ushering in efficiency by providing competition to Coal India Ltd,” said A K Jain, secretary, Ministry of Coal.

While one end of the power supply chain flourished, at the other end of power distribution it was a year of crisis. Record low power demand, coupled with historically high dues faced by state-owned distribution companies (discoms), diluted the impact of all former reforms for the latter.

The Ujwal DISCOM Assurance Yojana (UDAY), the earlier discom reform scheme, concluded in FY20 with most states failing to meet their stipulated targets.

Discoms’ aggregate technical & commercial (AT&C) losses, or power supply losses due to inefficient systems, were supposed to come down to 15 per cent and the average cost-revenue (ACS-ARR) gap to zero by FY20.

However, AT&C losses currently stand at 24.05 per cent and the cost-revenue gap at 94 paise, according to the UDAY portal. The numbers are the national average of the last available data of all discoms of FY20 and the indicative data of 14 states during FY21.

The dues of the discoms to power-generating companies hit Rs 1 trillion earlier this year. In June, the finance minister, under Aatmnirbhar Bharat package to boost the economy, announced a special liquidity infusion scheme for the power distribution sector. The size of the loan scheme was Rs 90,000 crore for discoms to clear their dues to gencos.

Under the same Aatmnirbhar Bharat, the Centre also announced increasing private participation in power distribution.

The Union ministry of power drafted a “Standard Bidding Document” (SBD) for privatising state-owned power distribution companies.

This will be the guiding document for state governments that want to offer their discoms to private companies.

However, the plan has not taken off. Till now, among the Union Territories, only Chandigarh issued a tender document for privatising its discom.

But the High Court of Punjab and Haryana has put in abeyance the privatisation of the Chandigarh electricity distribution company, following protests from its engineers and other workers.

No state except Odisha has been successful in getting private partnership for its electricity supply. Odisha recently awarded the power distribution licence for four circles to Tata Power. It has also bid out three of its power supply companies for privatisation. Uttar Pradesh was planning to privatise Purvanchal Vidyut Vitran Nigam, one of its five discoms. However, it has now put the plan in abeyance after protests from engineers and workers of UP Power Corporation.

The amended Electricity Act, 2003, is yet to be placed in Parliament and the National Tariff Policy, which is under revision since 2018, is also yet to be released.

Protesting farmers are opposing the draft Electricity Act because it proposes ending subsidised power for all, including farmers.

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