Power projects hit by Supreme Court verdict may get fuel supply from Coal India

NEW DELHI: Developers of electricity projects whose coal blocks have been cancelled by the Supreme Court will get long-term fuel supply from state-run Coal India if the Union Cabinet approves a proposal that the power ministry is working on.

The power ministry proposes coal supply to power projects that have secured debt, placed equipment orders and acquired land. The proposal will immediately benefit projects with combined capacity of 36,000 MW that are ready or likely to be commissioned by March 2017. These projects were to use coal from captive mines. The proposal will be sent for inter-ministerial consultations before being put up before the Cabinet Committee on Economic Affairs.

The power ministry plans to seek coal supply also to power plants whose attached coal mines were cancelled by the coal ministry for unsatisfactory progress much before last month’s Supreme Court verdict.

The two ministries now have a common minister, Piyush Goyal. In fact, the power ministry has withdrawn an earlier Cabinet note prepared by it seeking coal supply to all commissioned and upcoming power plants, so that it could accommodate the projects that were affected by the court order in its proposal. “The plan is to ensure complete coal supply to all plants that are commissioned or getting commissioned and have power purchase contracts,” a senior government official said.

The Supreme Court on September 24 cancelled mining licences given for 204 coal blocks, of which 59 were allocated to power plants with nearly 67,000 mw of generation capacity. The 59 blocks include 20 producing coal blocks catering to more than 11,000 mw projects. The government is expected to award some of these blocks to Coal India and auction the rest along with some fresh mines.


“Plants that have secured finance, acquired land and placed equipment orders are proposed to be offered fuel supply from Coal India, provided they have power purchase agreements with states and are unable to secure fresh blocks under the auctioning process,” the official said. As per the new proposal, 78,000 MW power plants that have signed letters of assurance with Coal India will get 90% of their fuel supply requirement from the state-run miner. Fuel supply has also been sought for another 21,000 MW of plants set to begin operations post 2017 and have letters of assurance from Coal India.

The power ministry has sought supply of 50% fuel requirement for projects that do not have letters of assurance from Coal India, but have signed power purchase agreements (PPAs) with states. If required, Coal India can supply imported coal to such projects after averaging out the prices with those of locally produced coal. However, power plants with short-term PPAs or PPAs signed under tariff-based bidding will be offered coal under e-auction through which Coal India sells spot coal.