The Central Electricity Regulatory Commission (CERC) has said that Coal India should meet the full requirement under fuel supply agreements (FSAs) with power utilities.
The regulatory body’s views have come after the Power Ministry sought its advice on two issues.
One, whether the existing policies permit Coal India to meet its FSA commitments (for post-March 2009 power projects) through supply of imported coal on cost-plus basis.
Two, whether the additional cost of imported coal under the existing provisions of power purchase agreements (PPAs) can be allowed to be passed through. On May 20, CERC told the nodal Ministry that it was Coal India’s responsibility to meet the full requirement under FSAs even if it has to resort to imports.
Distribution policy
However, CERC said that in order to allow the public sector miner to meet the shortfall in domestic coal supply through imports on cost-plus basis, changes in the New Coal Distribution Policy (NCDP) were necessary.
Also, the existing FSAs between Coal India and power producers will need to be modified through supplementary agreements.
For the pass-through of additional cost for imported coal, the regulatory body said that power developers need to approach the appropriate commission (Central or State regulatory commissions) under the ‘change in law’ clause. While we view this news as a positive for the sector, as it indicates the Government and regulator’s intent to provide relief to ailing developers, we believe that implementation of any such proposed policy may push back from State Electricity Boards and other stakeholders, at least in the near term, Amish Shah and Abhishek Bansal, analysts at Credit Suisse India Research, said in their report.