SHAKTI scheme: Second round of auction to keep out former winners

The first round, conducted in September 2017, saw the entire offered amount contracted by power developers

The second round of coal auction under the Centre’s SHAKTI scheme for stressed assets would keep out former winners and bidders. Private power players have raised concern with the Cabinet Secretary that the bidding guidelines under SHAKTI-II keep out several players, which are in dire need of coal.

Scheme for Harnessing and Allocating Koyala Transparently in India or SHAKTI is for power units with power purchase agreements (PPAs) but no long-term coal supply. Under the scheme, Coal India offers assured coal supply to units through bidding. The units have to quote the discount in their power tariffs that they would offer after getting cheaper coal from the company.

The first round which was conducted in September 2017 saw the entire offered amount contracted by power developers. Leading private sector players had participated in the round by quoting discounts in their power tariff in range of 1-4 paise per unit. Adani Power, Lalitpur (Bajaj Hindustan), KSK Mahanadi, GMR Energy, GVK were among the 10,000 Mw of units which were approved coal supply under SHAKTI.

The second round, however, could keep these units. The Association of Power Producers (APP) in their latest representation to the office of Cabinet Secretary has cited that the new guidelines disallow past participants.

“The scheme document of SHAKTI-II states that "maximum allocable quantity is 80 per cent of the maximum eligible quantity (calculated in terms of weighted average of the source grades) of all the eligible bidders who have submitted the initial price offer discount. It is clear that the shortage of 20 per cent of bidders' requirements was built in to the scheme document itself, and the SHAKTI policy as approved by the cabinet did not restrict the coal to 80 per cent of the requirement,” said the letter reviewed by Business Standard.

APP further said the the earlier bidders of SHAKTI auction are finding it very difficult to meet their PPA obligations due to shortfall in coal supply. The industry lobby has urged the Centre to review the guidelines and allow former participants as well.

Rating agency Crisil in its earlier report had estimated close to 19 gigawatts (Gw) capacity out of the 40 GW identified stressed power assets could participate SHAKTI-II.

“Our assessment of the 34 power plants suggests 19 GW of the 40 GW capacities do not have medium or long term PPAs, and hence, can participate in SHAKTI-II provided they meet other eligibility criteria set by Coal India for participation in the auction. Successful bidders under SHAKTI-II may find it difficult to secure long-term PPAs, given the high fixed cost of many of these projects,” Crisil said.

Relook at the first auction

• Power developers won contracts for the entire amount that was offered in the first round of coal auctions in Sept 2017
• Leading private sector players bid for the coal offered by Coal India, quoting discounts in their tariff in the range of 1-4 paise/unit
• Adani Power, Lalitpur (Bajaj Hindustan), KSK Mahanadi, GMR Energy, GVK were among the 10,000 Mw of units that were approved coal supply under SHAKTI