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Independent power producers allowed to use Coal India supplies across plants

This is expected to reduce the cost of power generation making them more competitive because if a power company has separate fuel supply agreement for each plant, it can transfer coal from one plant to another. This would also reduce transport cost and take the load off railways during peak season.

, ET Bureau|
Dec 09, 2019, 08.21 AM IST
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KOLKATA: Independent power producers will now be allowed to use contracted fuel supply from Coal India at any plant run by the same group, a senior executive at the state-run firm said.

This is expected to reduce the cost of power generation making them more competitive because if a power company has separate fuel supply agreement for each plant, it can transfer coal from one plant to another. This would also reduce transport cost and take the load off railways during peak season.

The beneficiary plant would only need to provide an affidavit to Coal India affirming that the additional coal supply beyond the annual contracted quantity for a particular plant shall only be used for generating power for distribution under long-term power purchase agreements with power distribution companies.

“Coal India board has recently allowed this category of plants, around 40 in numbers, to avail a facility which was so far being enjoyed by state and central government-owned power plants. State-owned producers like NTPC and DVC have benefited from the facility. The development will now benefit some 45,000 MW of generation capacity,” said a senior Coal India executive.

Sabyasachi Majumdar, group head at ratings firm ICRA, said flexibility of usage will result in power companies running their plants more efficiently since they now have the freedom to use the coal at the nearest location to the source or the most efficient plant. “It will result in a reduction of variable cost leading to the generation of cheaper power. If this is passed on to consumers, will lead to a reduction in their power bills,” he said.

“Interplant transfer of coal for private power producers will lead to better usage of coal and its transportation; leading to efficiencies and benefits to consumers,” said Ashok Khurana, director general of Association of Power Producers.

During 2018-19, Coal India supplied 99 million tonnes, about 16% of their production to independent power producers, which is estimated to have generated 22,000 MW of power.

“The move is in pursuance of government’s initiatives towards ease of doing business in the coal sector,” the Coal India executive said.

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