Mandate for imported coal-based thermal power plants to operate under Section 11 of Electricity Act no longer in effect: Ministry sources

Coal availability has been an issue. Most of the coal procurement is through the e-auction route, and, hence, there was a spike in electricity prices. (Representative image)

There has been no further extension to the order which mandated imported coal-based power plants to operate and generate electricity to their full capacity under section 11 of the Electricity Act, senior officials of the ministry of power told Moneycontrol on January 9.

On May 5 last year, when the country’s power demand had suddenly soared and thermal power plants had inadequate domestic coal to run fully, the power ministry invoked an emergency clause of the Electricity Act (section 11) and asked all thermal power plants running on imported coal to open and generate to their full capacity. At that time, most of these imported coal-based thermal power plants were shut due to high International coal prices and also because their power purchase agreements (PPAs) did not have adequate provision for pass-through of the increased cost of generation. But, after the order, they had to mandatorily restart operations.

This order was initially supposed to be valid till October 31, 2022. But, it was later extended to December 31, 2022.

On January 3 this year, the Central Electricity Regulatory Commission (CERC) ordered that plants running on imported coal should be compensated for supplying electricity under emergency circumstances. The order, though was issued in response to a petition filed by Tata Power Company Limited (TPCL), is expected to benefit power plants with a combined capacity of about 17 gigawatt (GW).

Now after the CERC order, the power ministry has started a series of consultations in this regard, power ministry officials said. “No further extension has been given to that order as of now. But the ministry has started active consultations with generators and discoms to review the power demand and work a way out. The CERC order and its impact are also being evaluated,” said a senior official requesting anonymity.

However, a media advisor to Union power minister RK Singh said such an order could be re-issued if the need arises. “The minister’s and his ministry’s stand is very clear on this. There will be no shortage of power in India. Whenever the ministry feels that there is a need for a sector to step up, such an order will be issued. Hence, if the need arises, an order like this may be re-issued,” the advisor said.

Despite the order getting lapsed, Moneycontrol has learnt that several imported coal-based thermal power plants continue to be operational. In such a circumstance, a second senior ministry official said that the compensation under the CERC order will not be applicable for this period as section 11 is no longer in force in this case.

The government is preparing to meet a projected peak electricity demand of 230.144 gigawatts (GW) in FY 2024, power ministry secretary Alok Kumar told Moneycontrol in November last year.

In April-May, 2022, many states in the country faced hours of outages because of an unrelenting surge in power demand due to a sudden heatwave, rapid economic recovery and shortage of coal to generate power.