CPPs oppose Coal ministry move to scrap fuel linkages

Captive power producers (CPPs) have opposed the proposal of Coal ministry to do away with coal linkages for such units.

The Indian Captive Power Producers' Association (ICCPA) feels this retrograde step will blunt the competitive edge of CPP based industries that have grounded huge investments in the last two decades.

Coal based CPPs with capacity of 41,000 Mw that have invested more than Rs two lakh crore are set to be jeopardised if the proposal takes effect.

Besides, the move is also seen to affect investments of the order of Rs 65 lakh crore in related industries.

As per the proposal, non-IPP (independent power producers) coal linkages maturing before July 1, 2016 will not be renewed and the linkages after this period would be terminated. The Coal ministry has also proposed to put up all coal linkages for auctions.

ICPPA has written to Coal minister Piyush Goyal, stating that existing coal linkages should not be discontinued abruptly since coal prices under linkage are already 35 per cent higher for CPPs than other producers.

 

“Other countries like China, Russia and West Asia support their industries through various energy initiatives to become globally competitive whereas the proposed linkage auctions will work contrary for the Indian industries. Stability of policy is one of the major factors not only for attracting investment but also to protect the existing investment. Existing investments should not be made victims of sudden changes in policy but should be given sufficient time to adjust themselves to changes in policy”, said the ICCPA letter to the Coal minister.

The association suggested that a minimum of 10-15 years should be given for switching over to any other system and immediate efforts should be made to bring down the domestically produced energy cost for the country.

 

Rajiv Agarwal, secretary, ICPPA said, “The MMDR (Mines and Minerals- Development & Regulation) Act, 2015 passed by the Parliament in the last Budget session also mandated the auction route for higher transparency, but it made a decent provision for transition.

The captive miners were allowed 15 years and merchant miners five years for the transition. It had also given captive miners the right of first refusal. But under the new proposal for coal linkages, the industries barely have any time left for transition.”

The CPP based industries contribute to approximately 13 per cent of GDP (Gross Domestic Product) and generate about 14 per cent of employment. The CPP capacity also accounts for 71 per cent of industrial power production.

However, the CPPs are discriminated in terms of coal allocation, dispatches, prices and coal quality, though all acts, policies and rules treat all power producers alike, the ICCPA alleged.