Power stocks rally on CCEA's nod for coal auction norms

Moneycontrol Bureau

Shares of power stocks are gaining muscles on cabinet's approval of methodology for auctioning coal blocks. Reliance Power, Tata Power and Adani Power rallied between 1-2 percent in early trade on Wednesday.

The cabinet's nod will provide upfront and production-linked payments and benchmarking of coal sale prices.

Coal blocks will be put for auction after the Environment Ministry reviews them, and bidders have to agree to a minimum work programme, according to an official statement.

"The methodology provides for auctioning the fully explored coal blocks, and also provides for fast-tracking the auction by exploration of regionally explored blocks," the statement said.

According to PTI sources, six explored blocks would be auctioned first, with estimated reserves of over 2,000 million tonnes.

Lauding the new coal policy, Gautam Chhaochharia, Head of India Research, UBS feels that this is a first step towards resolving the coal issue and to that extent even the power mess.

"Actually a lot of the problems can be solved if we just get coal out of the ground. So you look at the financial sector mess, the non-performing loans (NPL) mess - a lot of it is linked to power sector, power costs are high, you have power shortages. If we are able to get coal out of the ground then a lot of the problems will be solved," he said in an interview to CNBC-TV18.

However, effectiveness of the policy will  depend on various factors like land acquisition, environmental clearance or if the explored mine are just with identifiable reserves.

At 09:36 hrs Reliance Power was trading at Rs 72.65 (up 0.55 percent), Tata Power Company was at Rs 82.40 (up 1.92 percent), Adani Power was at Rs 34.40 (up 0.88 percent), was at Rs 146.65 (up Rs 1 0.96 percent) on the BSE.

Posted by Nasrin Sultana

(With inputs from PTI)