New private power projects, that plan to sell output in open market, will not get any coal this fiscal. The move, that aims to prevent a sharp spike in electricity rates, would hamper capacity addition by the private sector which has a key role in building new plants in the country.
The government has allocated one-fifth of available coal to power projects that would be commissioned in the current fiscal, giving priority to projects where tariff is determined by the old cost-plus system or with competitive bidding, government officials said.
The balance coal would be rationed among power projects commissioned during 2009-10 and 2010-11 that have signed supply contracts with states, a senior power ministry official said.
"Even if projects based on cost-plus basis fully pass on fuel cost , electricity tariffs would rise marginally. Coal India sells the fuel at almost one-third of international prices," the power ministry official said.
Projects based on competitive bidding absorb increase in fuel cost. Private power producers opposed government's decision of giving last priority to plants that sell power in open markets. About 20% of the new capacity added during 2009-12 will come from such plants, commonly known as merchant power projects.
Lanco Infratech, Monnet Ispat, Adani Power, Torrent Power and Jindal Power are among companies that plan to sell power in open market. A Lanco Infratech official said the government should decrease coal supply to power projects under fuel supply agreements. "The move to provide coal to only a few companies would create obstacles in the government's capacity addition programme," he said.
"The government assured coal linkages and blocks to merchant power projects in 2007 when the concept was introduced," an official in Jindal Power said.
Ashok Kumar Khurana, director-general of Association of Power Producers, a lobby group of private developers, said the government should give first priority to developers who invested funds based on coal supply commitments by Coal India.
Coal India will supply 347 million tonnes coal to power sector during 2011-12, of which 306 million tonnes stands committed under legally enforceable fuel supply contracts. Thus against requirement of over 95 million tonnes, only 41 million tonnes coal is available for projects commissioned after March 31, 2009. Of the 41 million tonnes coal, 8.5 million tonnes has been kept for new units to be commissioned during 2011-12. The balance 32.5 million tonnes will be distributed among new generating units commissioned during 2009-10 and 2010-11, the power ministry official said.
Additional coal available from Coal India during 2011-12 is inadequate for meeting needs of new generating units commissioned in 2009-12, he said.
"If there is any balance left, that may be distributed proportionately among merchant capacity. We would pursue Coal India for 15 millon tonnes additional coal," the official said. The power ministry would keep a close watch on performance of the projects that would be allocated coal and make modifications commensurate with their performance, he said.
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