Coal India Needs To Raise Supply By At Least 8% To Meet Group Of Ministers’ Plan: ICRA

Coal India Ltd. needs to ramp up its output by at least 8 percent from the present levels if the group of ministers’ recommendations on allowing domestic coal linkage for short-term power purchase agreements are to be met, said a report.

The Cabinet Committee on Economic Affairs had on Thursday approved the group of ministers’ recommendations on stressed power projects which include allowing domestic coal supplies to short-term power purchase agreements and increase coal supplies for special forward e-auction for the power sector.

“The measures approved such as allowing the use of domestic linkage coal for short-term power purchase agreements and procurement of bulk power by nodal agencies against pre-declared linkages are a positive for thermal independent power producers, given that coal-based operational capacities of 15-16 gigawatt do not have long-term power purchase agreements,” ICRA said in a report Friday.

It said the use of domestic coal will enable generators to offer more competitive tariffs for short-term sale, which is also likely to benefit distributing companies given that they purchase larger volumes through short-term power purchase pacts.

“While the CCEA has recommended regular auction of coal linkages and increase in quantity of coal for special forward e-auction, this would require significant ramping up of production and supplies by Coal India. But for this to happen, increase in output would have to be at least 8 percent up from the present levels under the assumption of 16 GW capacity operating at 50 percent plant load factor under the short-term/medium-term power purchase agreements,” it said.

The report also said the government is focused on the medium-term power purchase agreement route to resolve the issue of lack of pacts for coal-based independent power producers as seen from the first 2.5 GW pilot scheme executed in 2018 and the second 2.5 GW scheme in January 2019.