Private power producers using coal from government mines cannot sell electricity in the merchant market. The Coal Ministry is insisting that power companies sell electricity through competitive bidding.
According to a source, “the Ministry has written to independent power producers to participate in the bids for sale of power or face cancellation of coal block allocation. This would be included as a condition in the allocation process retrospectively.”
The Ministry has issued the directive after it came to light that some power producers were selling electricity at a much higher rate and were not participating in the bidding.
This, the source said, means “the power producers will have to participate in competitive bidding for sale of electricity. The firms cannot quote a price higher than that set for projects based on linkage coal.”
But power producers said the Ministry must look at operational issues when enforcing the order. Mr Ashok Khurana, Director-General, Association of Power Producers, said, “A power producer cannot change from a merchant to regulated model overnight. Moreover, it takes nearly a year to finalise a power purchase bid. At present, no such bid has been issued.”
Industry experts feel these steps are to check windfall gains to companies that have bagged captive mines. “In a way, this would offer guarantee of power offtake. There is always risk of offtake and fluctuations in a merchant model,” said an industry official.
However, there is no clarity on operational plants that are selling electricity in merchant markets. “Will they be shut till they finalise a power purchase agreement?” the industry official wondered.
The Government is of the view that benefits of electricity produced from cheaper coal sourced from captive mines must be passed on to the consumer. At present, distribution companies seal power purchase agreements with producers selected after tariff-based competitive bidding.