Coal ministry to kick off auctions in August for IPPs without PPAs

Photo: Reuters
The coal ministry has decided to set in motion the auctions for providing linkages to the independent power producers (IPPs) that are yet to tie up power purchase agreements (PPAs).

The process for auctions would take off in August this year. Earlier, the methodology for offering linkages to IPPs having PPAs based on domestic coal was fixed by the ministry on June 12, 2017. Later, Coal India (CIL) formed a committee with representatives from the power ministry and Central Electricity Authority (CEA) and convened meetings. CIL is expected to take the approval of its board by July 21 on the methodology and thereafter, the auction process for such IPPs are likely to start by the end of this month.

For providing linkages to IPPs with PPAs based on imported coal, an inter-ministerial committee has been constituted to work out the modalities.

"Providing coal linkages to IPPs having no PPAs is a welcome step. Without coal linkages or power offtake agreements, the IPPs are finding it tough to raise credit to finance their projects. PPAs have also dried out to weak power demand and poor financial health of electricity distribution companies," said an official with an IPP.

Poor financial health of the electricity distribution companies (discoms) has impacted offtake. Mounting aggregate technical & commercial (AT&C) losses coupled with operational inefficiencies of the state discoms has led to their outstanding debt shooting to Rs 3.95 lakh crore.

Weak industrial demand for power has seen the average plant load factor (PLF) of thermal power producers tank to an all-time low of 59.88 per cent in 2016-17 from the level of 77.5 per cent in 2009-10.

According to the power sector linkage policy, coal is supplied to the extent of 75 per cent of the annual contracted quantity to power capacities of 68,000 megawatts (Mw). In the April-June quarter of this financial year (FY), coal despatches by CIL to the power sector stood at 104.8 million tonnes (mt), recording growth of 2.4 per cent.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel