Margin money clause hits IPPs

To get coal linkages, Independent Power Producers (IPPs) will have to deposit 10 per cent of the equipment cost as margin money with the equipment suppliers, according to the latest feedbacks received by the state government from the Union coal and power ministries.

They need to go in for financial closures at the earliest to be eligible for coal linkage.

Till now, 5 IPPs - Kolkata-based CESC Ltd, Mahanadi Aban, Essar Power, Bhushan Thermal and Visa Athgarh have not received coal linkages for their units. The standing linkage committee (SLC) meeting of the coal ministry has not been held for the past six months.

Orissa energy minister S N Patro said, “what I have gathered from the coal and power ministries is that the IPPs without coal linkage and blocks will have to make a margin deposit of 10 per cent on the total equipment purchase with the suppliers.” “If the government so wishes then we will be forced to abide despite difficulties,” said a senior executive of Mahanadi Aban.

The managing director of CESC Ltd Sumantra Banerjee said, “we will take up the matter with appropriate authorities. This is untenable.” Starved of coal since they signed MoUs with the Orissa government in 2006, the IPPs recently decided on taking up the matter with the state chief minister. The Orissa energy department has requested Naveen Patnaik to take up the matter with coal ministry. Patro said, “IPPs like CESC and Mahanadi Aban are really in problems. To get coal linkages they are bound to obey the Centre’s recent stand on depositing margin money. Their progress in other areas is satisfactory”.

The IPPs have promised to start construction work by end-2009 if they receive coal linkage by 2008. Land acquisition, survey and soil testing work is going on. Similarly, water and other infrastructural facilities have been tied up. CESC requires 4.5 MTPA to 5 MTPA of long term coal linkage for its 1000 Mws plant. Mahanadi Aban has requested 6.3 MTPA of linkage for its 1030 Mws unit. Essar has applied for 5.4 MTPA of coal from Mandakini A block for its 2000 Mws plant.

Bhushan and Visa Atgarh are awaiting the coal ministry’s clearance for their 2000 Mws and 1000 Mws plants respectively. Bhushan’s requirement is around 15 MTPA and Visa wants 6.2 MTPA. Bhushan has signed a FSA with CMDC, a Chhattisgarh PSU for supply of coal as an alternative source. Orissa signed 13 MoUs with IPPs in 2006 aggregating over 16,000 Mws of power at an investment of around Rs 65,000 crore.