The Union Cabinet on Wednesday approved a new coal linkage policy that seeks to lower power tariffs by allocating coal blocks through a reverse auction.
True to the Narendra Modi government’s penchant for acronyms, the new policy is called SHAKTI which stands for Scheme for Harnessing and Allocating Koyala Transparently in India. The new policy will lead to gradual phasing out of the old one.
Briefing mediapersons post the Cabinet decision, Union Minister for Coal, Power and Renewable Energy, Piyush Goyal, said the policy aimed to ensure coal availability at all power plants and reduce dependence on imports of the dry fuel. It will also help revive the stressed assets in the power sector, he said.
The policy is expected to bring 30,000 MW of locked capacity into generation.
The policy also seeks to alleviate the stress that certain power units are under due to unavailability of linkages. It thus bodes well not just for the infrastructure sector but also for the public sector banks which have billions of rupees lying unpaid in loans given to the power companies.
Coal linkages for power plants will be based on auction or through power purchase agreements based on competitive bidding of tariffs. Power generation companies belonging to the Centre and the states will not be part of the policy as they will continue to get coal linkages as per the recommendations of the ministry of power. Take-off of coal will be permitted against valid medium-term and long-term Power Purchase Agreements.
The policy covers coal-based plants that are under-construction or are going to be constructed, provided these units are commissioned by March 31, 2022.
Companies participating in auction will bid for discount on the existing tariff. The discount on tariff would be adjusted from the gross amount of bill at the time of billing.Bidding for future linkages for supply of coal to power producers who have not signed a power purchase agreement with the state electricity board will be done over the price notified by Coal India. The PPA will have to be submitted within 2 years.