A final decision would be taken only after the detailed presentation from the power ministry
Coal ministry is working out plans to introduce tariff-based competitive bidding for auctioning coal linkages to power plants in a bid to keep power tariffs under check.
Till now the government was granting coal linkages with assurance of supplies from Coal India on an adhoc basis, much like the way it did for allocating blocks. But after the landmark Supreme Court ruling that cancelled all such adhoc coal block allocations, the ministry has recently started looking at the option of e-auction of existing as well as future coal linkages to keep away from any future allegation of impropriety or adhoc decisions on awarding the linkages. And in order to replace such adhoc decisions made by the government committees in the past, tariff based competitive bidding is being considered for which a final decision would be taken only after the detailed presentation from the power ministry.
"Representatives of the power ministry suggested that since power is a regulated sector, the allocation mechanism would be such that the benefits of such linkage is passed on to the consumers. As per the initial views, one of the options would be to use tariff based competitive bidding for allotment of coal linkages. Ministry of power would send detailed comments subsequently," minutes of inter-ministerial committee on coal constituted for proposed auction of coal linkages or letter of assurances through competitive bidding disclosed on Tuesday.
Coal secretary Anil Swarup had earlier told dna that the committee has been set up to examine whether the coal linkages issued over the years stand the test of law in the light of recent judgments and should the auctioning of blocks has to to be done.
The power ministry however is of the view that since there is a significant backlog of linkages against which fuel supply agreements are not yet issued, preference should be given to these during the auctioning.
"These includes 4000 mega watt (MW) capacity. In addition for 30,000 mw, LOAs have already been issued. These are prior commitments which need to be fulfilled before any fresh linkages can be granted," the document said.
As per the Coal Distribution Policy of 2007, Standing Linkage Committee (long-term) consisting of members drawn from various ministries recommend LOAs for supply of coal.
Based on the SLC (LT)'s recommendations, LOAs are issued to the power sector (including IPPs and captive power plants), steel (including sponge and pig iron) and cement sectors while for others LOAs are issued by Coal India.
During the meeting it was suggested that LOAs for power sector would be issued for a minimum tenure of 20 years and between 5-7 years for non-regulated sectors like steel and cement.
To decide on these issues, a decision has been taken to engage an external consultant to examine the structures and implementation models to auction the linkages.
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