National miner Coal India needs to ramp up its output by at least 8 per cent from the present levels if the group of ministers’ (GoM) recommendations on allowing domestic coal linkage for short-term PPAs are to be met, says a report.

The Cabinet Committee on Economic Affairs had Thursday approved the GoM recommendations on stressed power projects which include allowing domestic coal supplies to short-term PPAs and increase coal supplies for special forward e-auction for the power sector.

“The measures approved such as allowing the use of domestic linkage coal for short-term PPAs and procurement of bulk power by nodal agencies against pre-declared linkages are a positive for thermal IPPs, given that coal-based operational capacities of 15-16 gw do not have long-term PPAs,” ICRA said in a report Friday.

It further said use of domestic coal will enable generators to offer more competitive tariffs for short-term sale, which is also likely to benefit discoms given that they purchase larger volumes through short-term PPAs.

“While the CCEA has recommended regular auction of coal linkages and increase in quantity of coal for special forward e-auction, this would require significant ramping up of production and supplies by Coal India.

“But for this to happen, increase in output would have to be at least 8 per cent up from the present levels under the assumption of 16 GW capacity operating at 50 percent PLF under the short-term/medium-term PPAs,” it said.

The report also notes that the government is focused on the medium-term PPA route to resolve the issue of lack of PPAs for coal-based IPPs as seen from the first 2.5 gw pilot scheme executed in 2018 and the second 2.5 gw scheme in January 2019. PTI PSK

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