Coal block auctions likely by December, power cos to get priority

  • Anupama Airy, Hindustan Times, New Delhi
  • Updated: Nov 01, 2014 01:34 IST

The coal ministry may commence the auction of coal blocks by early as December this year, highly placed sources in the government told HT. The Cabinet Committee of Economic Affairs (CCEA) is expected to approve the plan soon.

As 79 out of the 214 blocks de-allocated by the Supreme Court relate to the power sector, the move is expected to help power projects with a combined capacity of 40,000 MW, ease chronic power shortages over time and give a fillip to the government’s efforts to revive the economy. Investments of Rs 2 lakh crore are stuck in these projects.

At present, Indian public and private sector banks have a combined exposure of close to Rs 5 lakh crore in various coal and gas-based power projects. An early auction of coal blocks will provide fuel linkages to stressed power projects and ease power shortages. A steady and quality supply of power is a necessary pre-condition for growth.

“The decision vests with the CCEA.... as soon as the approvals come, we (ministry of coal) will commence auction of coal blocks, by December this year,” the source told HT.

“Those power projects that don’t get a coal block in the auction will be considered for allocation of coal by Coal India Ltd. CIL will import coal to meet any shortfall in its own production and pool this with a part of domestic production,” he said.

The total installed power capacity of the country is 250,000 MW. Coal-based plants account for 150,000 MW or 60% of this.

Coal shortages have short-circuited India’s power capacity addition plans. Coal production could not keep pace with demand from the power sector: in the last 5 years, demand grew 87%, but coal output grew a mere 15%.

Adding to this low production were Letters of Assurance (LoAs) for coal linkages the coal ministry in the previous regime had issued to power projects. Upto 2010, LoAs were issued for projects equivalent to 108,000 MW, though coal available was sufficient to generate only 60,000 MW, or 65% of the coal requirement if power plants operated at 85% of capacity.

As on date, Coal India has signed Fuel Supply Agreement for about 74,000 MW. That still leaves about 14,500 MW already commissioned or to be commissioned in the 12th Plan, without coal linkages provided.

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