CoalMin panel recommends tapering supplies to power projects

Supply would require modification in existing tapering linkage policy for which ministry would soon move to Cabinet

An inter-ministerial panel under the coal ministry has overruled an objection raised by Coal India Ltd (CIL) and recommended tapering coal supplies to power projects with a capacity of 4,350 Mw.

The supply would require a modification in the existing tapering linkage policy, for which the ministry would soon move the Union Cabinet.

Tapering linkages are temporary, gradually decreasing coal supplies provided to end-use projects to help tide over the delay in the development of their linked captive coal blocks.

The recommendation of the standing linkage committee, if approved, would benefit the projects of Vedanta subsidiary Sterlite Energy, Chhattisgarh State Electricity Board, GMR Energy and Gujarat Mineral Development Corp.

The power plants are part of the 78,000-Mw capacity projects approved by the Cabinet Committee on Economic Affairs for signing fuel supply agreements (FSAs) in June this year. Under the current policy, tapering linkage is provided for only three years---meeting 75% of the requirement in the first year, 50% in the second and 25% in the third---from the normative date of power production.

However, the project developers have been seeking tapering linkages beyond three years, arguing the delay in developing their captive blocks was due to the lack of clearances and the ‘no-go’ policy that barred development activities in mines for two years. The committee took up the issue in its October 4 meeting, but this was met with stiff opposition from CIL.

The miner argued the commitments for supplies to 78,000-Mw projects were based on an optimistic production projection, adding no new green clearances had been provided for new mining projects or evacuation of coal.

“The special dispensation being considered by the committee for these projects was based on delay in environment and forest clearances. The same reasons apply to projects of Coal India,” CIL Director (technical) N Kumar told the panel.

He added CIL would face the risk of legal action if FSAs were to be signed for additional quantities, in case it defaulted on meeting trigger levels due to lack of coal availability resulting from lack of clearances and evacuation arrangements.

However, the panel, under the ministry’s additional secretary A K Dubey, recommended the linkages with the condition that the supplies would be subject to availability after meeting the requirement of regular FSAs, part of the 78,000-Mw capacity; regular FSAs would have precedence over the linkage projects and the supplies would be reviewed once coal was available for 60,000-Mw capacity.

The panel clarified the recommendation was only to ensure the plants already commissioned didn’t face shutdowns.