The Central Electricity Regulatory Commission has said that Coal India should meet the full requirement of coal under fuel supply agreements (FSAs) with power utilities.
The regulatory commission’s views have come after the Power Ministry sought its advice on two issues.
First, 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.
Second, 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 is the full responsibility of Coal India to meet the full requirement of coal under FSAs even by resorting to import, if necessary.
Coal distribution policy
However, in order to allow the public sector miner to meet the shortfall in domestic coal supply through supply of imported coal on cost-plus basis, changes in New Coal Distribution Policy (NCDP) are necessary.
Also, the existing FSAs between Coal India and power producers will need to be modified through supplementary agreements.
Additional cost for imported coal
With regard to pass-through of additional cost for imported coal, CERC has opined that power developers shall need to approach the appropriate commission (Central or State regulatory commissions) for pass-through under ‘change in law’ clause.
“While we view this news flow 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 shall likely face 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.