Auction, a CIL bid to exploit stressed plants: Power companies

<p> </p><p>Private power producers have alleged that upcoming coal auctions for stressed power plants is an attempt by Coal India[NSE -2.81 %] to maximise profits as a state monopoly by exploiting the plight of fuel-starved projects.<br><br>Pressure from lenders and desperation for coal may force stressed projects to make aggressive bids at the coal auctions, they said. Also, there are high chances of these projects losing bank guarantees if there is no demand from discoms in two years, power producers said.<br><br>According to auction rules, bank guarantees of Rs 1 crore per 100,000 tonnes of coal supply to be submitted by selected bidders will get forfeited if they fail to sign power purchase agreements (PPAs) in two years.<br><br>A senior official from the coal ministry said the auction is based on suggestions from the power ministry, and that bidders should submit bids only after proper evaluation.<br><br>He said Coal India will launch a second round of auction in a month, giving power companies the option to use the coal to generate and sell electricity in shortterm market up to one year.<br><br>Coal India did not respond to queries sent on Saturday as of press time Sunday. The state-owned company has issued the bid documents for coal supply auctions under Clause b (iii) of Scheme for Harnessing and Allocating Koyala Transparently in India (Shakti Policy).<br><br>Power plants that do not have coal and power purchase agreements can participate in auctions and highest bidders get to book coal quantity for the projects. Actual availability of coal to the projects will be contingent to signing of medium and long term PPAs with discoms, within two years of the award.<br><br>Industry body Association of Power Producers (APP) has written to coal minister Prahlad Joshi and power minister RK Singh, seeking intervention. “Sadly, this appears to be a typical case of state monopoly exploiting the plight of stranded power project developers by designing an auction meant for coal company profit maximisation instead of helping out stressed power projects,” APP director general Ashok Khurana said in the letter.<br><br>In a separate letter to Singh, Khurana wrote, “This present linkage auction process has been structured and designed in a way that seeks to maximise the possibility of squeezing out irrational bids from developers who are desperate for coal to run stranded projects.”<br><br>State electricity distribution companies have not come out with significant long-term or medium-term contracts in the last 7-8 years. In fact, no state has floated long-term PPA tenders after a 1,000-mw bid byTelangana in 2016. The union power ministry had in May 2018 aggregated 1900-mw PPAs to alleviate stress on the industry. The second round of the scheme for 2,500-mw PPAs has been shelved due to lack of interest from states.<br><br>Referred from economic times, dated Jan 06 2020.</p><p> </p>