Govt reviews power purchase bid rules

Under SHAKTI, government-owned Coal India offers assured coal supply to units through bidding

The committee set up to recommend changes in the bidding guidelines for power projects would now build upon the SHAKTI scheme to help stranded assets get both coal supply and power sale contracts.

Close to 16,000 Mw of coal-based power projects in India neither have coal supply or a power purchase agreement (PPA) with any state. Of this, 6,250 Mw is installed and 9,854 Mw was under construction as on August.

The committee is chaired by Pratyush Sinha, former central vigilance commissioner. “SHAKTI allows power units to get a medium-term PPA and coal supply for the same period or more, open for extension. The committee is looking to adopt a similar methodology in case-1 bidding of power projects,” said an official.

Under SHAKTI (Scheme for Harnessing and Allocating Koyla Transparently in India), government-owned Coal India offers assured coal supply to units through bidding. The units have to quote the discount in their power rates that they would offer after getting cheaper coal from Coal India.

“This would help stranded assets start their operations. They can get a PPA for even one year and then will get coal supply. Both could be extended as per demand. The idea is to include concessional coal supply in the Case-1 bidding guidelines, presently not part of it,” said the official.

PPA bidding in India is done in two modes — Case 1, wherein the state or Centre does not provide any details of fuel source and project location and Case 2, where all this is provided. The Sinha committee has overseen Case-2 bidding parameters and drafted new guidelines in 2016. Case-2 bidding has been a success, with 4,000 Mw of ultra mega power plants (UMPPs) awarded through this route.

With UMPP bidding failing in 2014 as private players contested the bid document, the committee has since revised the guidelines. The Case-1 bidding document has been under consultation for two years. However, as power demand has not increased considerably, only Kerala and Uttar Pradesh have signed PPAs in the past five years.

The first bidding held by Coal India saw leading private sector players bid for coal by quoting discounts in their power rates if one to four paise per unit. Nil interest was received in a similar exercise done by Gujarat and Maharashtra last month. The states were offering their share of coal to private companies if the latter chose to sell discounted power to the state.