The Department of Energy requires all imported coal-based thermal power plants to run at full capacity


The ministry said that “some imported coal-based capacity is still not operational”.

The ministry said that “some imported coal-based capacity is still not operational”.

The Department of Energy has ordered all imported coal-fired power plants to run at full capacity amid ongoing dry fuel shortages at thermal power plants, which is crippling power generation.

An executive order issued by the department on Thursday notes that most states have allowed the higher cost of imported coal to be passed on to consumers, which has helped bring the 17,600 MW total to 10,000 MW of imported coal-based capacity thermal power plants in the country.

However, the ministry said that “some imported coal-based capacity is still not operational”.

The Department has issued instructions under Section 11 of the Electricity Act. It has ordered all imported coal-fired power plants to operate at full capacity and generate electricity.

In the case of imported coal-fired power plants in bankruptcy proceedings, the resolution professionals will take steps to make them operational.

These systems will primarily supply electricity to the PPA (Power Purchase Agreement) holders (discoms). Any surplus electricity left over after that, or electricity for which there is no PPA, will be sold on electricity exchanges, the ministry said.

In such cases, if the facility has PPAs with multiple discoms, a discom will not schedule an amount of electricity under its PPA, that electricity will be offered to other PPA holders, and any remaining amount thereafter will be sold through the exchange, it added.

Given that the current PPAs do not provide for the current high cost of imported coal to be passed on, the tariffs at which the electricity is to be delivered to the PPA holders (discoms) will be worked out by a committee formed by the Department of Energy (MoP) with representatives from the Ministry, the CEA (Central Electricity Authority) and the CERC (Centra Electricity Regulatory Commission).

This committee will ensure that the benchmark electricity tariffs thus worked out meet all the prudent costs of using imported coal for electricity generation, including the current price of coal, transportation costs and operating and maintenance costs, and a reasonable margin, the official order said.

If the producers/affiliated companies or coal mines are abroad, the profit from extraction is credited to the amount of the producer/affiliated company’s participation in the coal mine.

The PPA holders (discoms) have the option to make the payment to the generator according to the reference rate worked out by the group or at a rate jointly negotiated with the generator.

The order also stipulated that excess electricity from these plants should be sold on the electricity exchanges.

Any net profit from the sale of electricity not sold to the PPA owner (discom) and sold on the electricity exchanges is divided monthly between the producer and the PPA owner in a 50:50 ratio.

This order is valid until October 31, 2022, the ministry said.

The ministry noted that energy demand has increased by nearly 20 percent and domestic coal supply has increased, but the increase in supply is insufficient to meet the increased demand for electricity.

“This (demand-supply mismatch) leads to load shedding in various areas. Due to the mismatch between daily coal consumption for power generation and daily coal input at the power plant, coal stocks at the power plant have been declining at an alarming rate,” it noted.

The international price of coal has risen in unprecedented ways. It is currently around 140 US dollars per ton.

As a result, the supply of coal for long-distance blending, which was on the order of 37 million tons in 2015-16, has declined, putting greater pressure on domestic coal, the ministry said.

The imported coal-based generation capacity is around 17,600 MW. The PPAS for imported coal-fired power plants would not have adequate provision for passing on the full increase in the international coal price, she added.

At present, the price of imported coal, operating imported coal-fired power plants and supplying electricity at PPA tariffs will result in huge losses for producers, which is why they are unwilling to operate these power plants, she noted.

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