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India : COAL ministry plans to introduce tariff-based competitive bidding
Publish Date : 29-Jan-2015
Coal ministry is planning to introduce tariff-based competitive bidding for auctioning coal linkages to power plants aiming at continuously checking power tariffs. The government was till now granting coal linkages with assurance of supplies from Coal India on an adhoc basis, similar to the way it did to allocate blocks. However, following the Supreme Court ruling which amounted to cancellation of all such adhoc coal block allocations, the ministry recently started seeking option of e-auction of existing and also future coal linkages to keep away from any future allegation of impropriety or adhoc decisions on awarding the linkages.
In a move to replace such adhoc decisions executed by the government committees in the past, tariff based competitive bidding is being considered for which a final decision is expected only after the detailed presentation from the power ministry. Minutes of inter-ministerial committee on coal constituted for proposed auction of coal linkages or letter of assurances through competitive bidding have stated that, “Representatives of the power ministry suggested that since power is a regulated sector, the allocation mechanism would be such that the benefits of such linkage is passed on to the consumers. As per the initial views, one of the options would be to use tariff based competitive bidding for allotment of coal linkages. Ministry of power would send detailed comments subsequently.”
A committee has been formed to examine whether the coal linkages issued over the years are in accordance with the law in regards with the latest judgments and is it required to carry out auctioning of blocks. However, the power ministry is of the opinion that as there is a significant backlog of linkages against which fuel supply agreements are not yet issued, more preference should be given to these during the auctioning. As per the document, “These includes 4000 mega watt (MW) capacity. In addition for 30,000 mw, LOAs have already been issued. These are prior commitments which need to be fulfilled before any fresh linkages can be granted.” According to the Coal Distribution Policy of 2007, Standing Linkage Committee (long-term) comprising of members sourced from various ministries recommend LOAs for supply of coal.
