Ineligible Power Producers Seek To Bid In Round Two Of Coal E-Auction

Private power producers, who won bids for coal supply in the first round, have raised concerns over being rendered ineligible to participate in the second round.

In a letter to Coal Minister Piyush Goal in February, the Association of Power Producers urged the government to allow the first-round winners to bid in the forthcoming auctions under the 2017 scheme. BloombergQuint has reviewed a copy. The lobby said it would help power producers meet their coal requirement and also benefit distribution companies and consumers get cheaper power.

The Scheme to Harness and Allocate Koyla (Coal) Transparently or Shakti was introduced to bring down coal imports and provide fuel to stressed plants. It offers assured coal supply to units which have power purchase agreements but no long-term coal linkage. They have to offer discounts in tariffs after getting cheaper coal from the state-run miner. The last date to submit bids for the second round is March 22.

That comes when coal imports have jumped 19 percent to 171.85 million tonne in 2018, their fastest pace in four years, according to a news agency PTI.

Concerns Of Power Producers

The power producer lobby, in a letter to the Cabinet Secretary, highlighted shortfall in the coal allocation despite winning bids in e-auctions. The lobby argued that Shakti allowed them to submit bids for up to 80 percent of the requirement, and a shortage of 20 percent was built into the scheme.

The winners of the first auction are finding it difficult to meet their obligations to sell power because of the fuel shortfall, according to the association. “Normally, there is a lot of gap between the quantum to be supplied due to production and evacuation constraints,” Ashok Khurana, director general at Association of Power Producers told BloombergQuint. “We do not keep project-specific data. However, in some cases when we take overall supply not only limited to Shakti first round, the materialisation rate is as low as 45 percent.”

First Auction Winners

Under the first round of Shakti in September 2017, 10 power companies offering 1-4 paisa per unit discount on tariff won 27.18 million tonne yearly coal linkage for 25 years. Adani Power Ltd., Lalitpur (Bajaj Hindustan), KSK Mahanadi Power Company Ltd., GMR Energy Ltd. and GVK Energy Ltd. won the bids. These were part of the 34 stressed power plants with a total capacity of 40,130 megawatt which had taken Rs 1.8 lakh-crore worth of loans, according a list provided by the Finance Ministry in 2017. Of these, 11 with a capacity of 11,000 MW have been resolved.

Cabinet Relief Not Immediate

The Cabinet Committee on Economic Affairs on March 7 approved suggestions of a high-level committee to revive stressed power plants. This includes producers who have already participated in the first round but could not secure coal linkages for the full annual contracted quantity. “Bidders... may obtain the linkage for the balance quantity by participating in future auctions at a later stage under the scheme after benchmarking discount,” it said.

But this won't be applicable for the second auction because CCEA approval came after the bid was opened, an official from the Ministry of Power told BloombergQuint on condition of anonymity.