Quote low power tariffs to get coal blocks: Govt to power cos

Power companies will get coal blocks only if they quote low tariffs, a move that is expected to revive investment in the sector and protect consumers from spiralling electricity rates.

Blocks earmarked for the power sector will be given to states, which will have to invite tariff-based bids for electricity supply, a top mines ministry official said. These states, in consultation with the power ministry, will then recommend allocation of blocks to the lowest bidders to the coal ministry.

"This decision has been taken after the power ministry's insistence to avoid a spike in retail electricity tariff," the official said. Since January 2011, power companies have to participate in tariff-based bidding to bag state electricity contracts. "Companies would have quoted higher tariff if coal blocks came at a high cost," he said.

The government plans to auction 51 coal mines with 18,600 million tonnes of reserves after a gap of three years.

Cement and steel companies will have to participate in a two-stage bidding process that will be based on upfront payment, the official said.

The mines ministry will notify "the auction by competitive bidding of coal mines rules, 2011" once they are vetted by the law ministry. It expects aggressive bidding for the mines as overall coal deficit is likely to increase to 238 million tonnes by 2016-2017 from the present 53 million tonnes.

"Coal supply is the main problem for the Indian power sector. Such projects will undoubtedly attract response from power companies like ultra mega power projects do," an Adani Power official said, adding that the proposed bidding process for projects with coal blocks will bring back investors to the power sector.

An official with JSW Energy said power companies would prefer to bid low for such projects with attached coal mines rather than wait for fuel supply from state-run Coal India Ltd.

The government is already planning steps to cap electricity tariffs of companies that have secure supplies from Coal India or captive mines.

Nearly 60% of the country's power generation capacity is coal-fired and 22,000-mw capacity of new power plants is stranded for want of coal. The situation is unlikely to improve as Coal India has indicated that it will be able to supply only 100 million tonnes of additional coal to the power sector in the next five years which will not be sufficient to run projects commissioned in the 11th plan.

Some big blocks that will be auctioned include Deocha-Pachami in West Bengal, Tentuloi in Orissa and Badam Dip Side and Dip Side of Rhone-Rautpara in Jharkhand.

  Similar Posts

Share it