In a big relief to the power sector, the Cabinet Committee on Economic Affairs (CCEA) has given its approval to long pending new coal linkage policy, for ensuring proper supply of the fuel to power plants through the reverse auction route. The coal linkage auction policy for power has been named 'Shakti' or a scheme to harness and allocate koyla (Coal) transparently in India. The move may ease stress on account of non-availability of linkages to power sector projects.
Shakti will help power producers ensure fuel supplies in an organised manner. The government's initiatives as well as international market conditions have helped bring down price of the dry fuel and boosted domestic production. But a mechanism was required for providing coal linkages to power plants at competitive rates. The new policy will address this concern and put in place a proper mechanism for sourcing of the dry fuel by the power plants as per their schedules.
The Coal Ministry in its statement has said that 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 further said that Coal drawal will be permitted against valid long-term PPAs and to be concluded medium term PPAs. PPA is a contract between two parties, one which generates electricity and one which is looking to purchase it.
The Ministry added that as per the new policy, thermal power plants (TPPs) having Letter of Assurance (LoA) will be eligible to sign Fuel Supply Agreement (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.