Govt clears new coal linkage policy

New Delhi: The government Wednesday approved a new policy under which fuel supply to the power sector will be either through the auction route or power purchase pact based on competitive bidding of tariffs.

The move may ease stress on account of non-availability of linkages to power sector projects.

The decision was taken at the meeting of Cabinet Committee on Economic Affairs (CCEA) headed by Prime Minister Narendra Modi.

“The coal availability scenario has now emerged from scarcity to adequacy,” the Coal Ministry said in a statement.

“In this adequate coal availability scenario, the present policy proposes a fading away of the old linkage allocation policy and emergence of a new linkage allocation policy based on transparent and objective criteria for the optimal utilisation of the natural resources,” it said.

The CCEA has approved the signing of Fuel Supply Agreement (FSA) with the Letter of Assurance (LoA) holders, it said.

Allocation of linkages for power sector shall be based on auction of linkages or through Power Purchase Agreement (PPA) based on competitive bidding of tariffs except for the state and the central power generating companies and the exceptions provided in Tariff Policy, 2016, it said.

PPA is a contract between two parties, one which generates electricity and one which is looking to purchase it.

“Coal drawal will be permitted against valid long-term PPAs and to be concluded medium term PPAs,” the statement said.

CCEA approved “fading away of the existing LoA-FSA regime and introduction of a new more transparent coal allocation policy for power sector, 2017-SHAKTI (Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India),” it said.

Allocation/grant of linkages will be based on auction and/or tariff based bidding, it said, adding that the policy attempts to make optimal allocation of the vital natural resource across the power units.

As per the new policy, thermal power plants (TPPs) having LoA will be eligible to sign FSA after ensuring that the plants are commissioned, respective milestones met, all specified conditions of the LoA fulfilled within specified timeframe and where nothing adverse is detected against the LoA holders and the TPPs are commissioned before March 31, 2022.

TPPs, part of 78000 mw, which could not be commissioned by March 31, 2015 will now be eligible for coal drawal if the plants are commissioned before March 31, 2022.

Actual coal supplies to all TPPs will be to the extent of long term PPAs or medium term PPAs to be concluded in future and coal linkages will be granted to central and state Gencos on recommendations of Power Ministry.

Coal linkages will be granted on auction basis for Independent Power producers (IPPs) with PPA based on domestic coal. The IPPs participating in auction will bid for discount on the existing tariff. The discount on tariff would be adjusted from the gross amount of bill at the time of billing. PTI

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