KOLKATA (miningweekly.com) – India’s Coal Ministry has eased rules for thermal power companies allowing them to source coal even without power purchase agreements (PPAs) with electricity distribution companies in place.
The Cabinet Committee on Economic Affairs approved the revised rules for sourcing of coal by such power generation companies early this month.
However, the government has stipulated that while thermal generation companies would be able to seek long-term coal supply linkages from State-run coal miners, as these companies did not have PPAs, the latter would have to mandatorily sell electricity generated through the spot power exchange or the government portal for bidding by power sellers and buyers to meet short-term demand of electricity, the notified rules stated.
Earlier rules permitted thermal power companies to apply for long coal supply linkages only if they had concluded long- or mid-term PPAs with distribution companies.
The revised rules were seen as a bail-out for large numbers of independent power producers (IPPs) with estimated aggregate generating capacity of about 25 GW to bid for dry fuel supplies as large number of these IPPs did not have PPAs in place and, hence, their power generating assets have been idling.
It was pointed out that the relaxation of rules would ensure that power projects stalled owing to the absence of fuel supplies were not categorised as nonperforming assets by banks, which had funded the projects, owing to their being unable to ensure revenue generation and meet debt obligations to banks.
In another significant change, the Coal Ministry has stipulated that in the case of default in terms of volumes supplied by coal mining companies, despite receiving payments from thermal power companies, supply linkage agreements would not be allowed to lapse following the timeframe set out in such an agreement; instead the shortfall in volume of coal supplies would be allowed to be carried over for three months from the date of lapse of the respective supply linkage agreement.