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Fate of power plants that lost blocks to be decided next month, says Anil Swarup

The government will decide next month the fate of thermal power projects that lost coal blocks and have so far been receiving coal supplies on ad-hoc basis from Coal India, coal secretary Anil Swarup said.

“At present demand for coal outstrips supplies and the government’s priority is to supply fuel to the set of thermal power projects that have signed power purchase agreements with states – some 78,000 Mw of new capacities are to be supplied coal,” Swarup told ET. “We will take a decision about these plants on the basis of availability and demand of coal, after taking care of the ones that have power purchase agreements,” he said.

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It is estimated the affected plants, which have not been able to win any blocks through the recent e-auctions, together account for 22,000 Mw of power generation with totalinvestments of around Rs 1.1 lakh crore

Coal India (CIL) will continue to supply coal to companies without power purchase agreements on an ad-hoc basis till June.

These affected thermal power projects were allotted coal blocks before the Supreme Court declared them illegal. Such projects were also offered fuel supply contracts – technically termed ‘tapering linkages’ – which involved supplying diminishing volumes each year till the time their allotted blocks were to start production. It was assumed that a coal block can start production within four years and the coal supply from CIL was scheduled to taper down to zero by the fifth year.

Following the Supreme Court’s order, these projects are left with no coal blocks and no long-term fuel-supply contracts.

Now, projects without fuel supply commitment do not qualify for bidding in power purchase agreements and the ones without such agreements are not on the priority list of the government for supplying coal. And banks would not want to finance them, due to lack of fuel availability.

“None of these projects are receiving more than 40%-50% of the total volume of fuel they need to run their plants at full capacity,” said Ashok Khurana, director general of the Association of Power Producers. “We have made many presentations to the government, however, there has been no respite till now,” he said.

According to Khurana, some 6,500 Mw of capacities were already commissioned by the time the SC declared block allocations illegal. “With time, many are nearing completion and are likely to be stranded for want of coal.

Some of these power projects are having hard time trying to convince banks for disbursing funds since financiers go by fuel availability of power plants. Most of these companies are stuck for lack of coal,” he said.

Swarup said coal was being supplied to these projects on a temporary basis on the assumption that they will mine from their coal blocks. With coal blocks being taken away, the very premise on which these plants were being supplied coal has been rendered nonexistent. “We will take a decision by June. However, at this stage we do not know what the decision will be,” he said.


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