Norms for medium-term PPAs for stressed coal plants next month

The power ministry will next month unveil new norms for medium-term (5-7 years) power purchase agreement with an aim to revive commissioned stressed coal based capacities worth Rs 1.44 lakh crore.
The move will help nearly 12GW commissioned thermal power plants get the medium-term power purchase agreement (PPA) which is a prerequisite for getting coal linkage, a source said.
At present, out of the 40 GW stressed coal based power generation capacity, 28 plants of 24 GW worth Rs 1.44 lakh crore are commissioned. Nearly half of these capacities (12GW) do not have coal linkage because of no PPAs.
"The power ministry has drafted the guidelines for auction for procurement of power for medium term (5-7 years) for commissioned coal based thermal plants. The new norms will be notified sometime next month," the source said.

The source explained that these PPAs would have single component tariff. There would be no provision for fixed cost.
According to the ministry estimates, the states are buying power at variable cost of Rs 3 per unit excluding fixed cost. Since a large number of plants targeted by the ministry are pit head, these can easily supply power at a single component tariff of below Rs 3 per unit.

The source said it will be a win-win situation for the states, consumers, bankers and project developers. While the states and consumers will get affordable power, project developers and bankers would be able to run their stranded capacities.

The source said the bankers have already supported the new norms as it would help them explore options of hair cut and strategic debt restructuring for running these capacities.
Also, the combined efforts of SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India)and new norms for medium-term PPAs would help in revival of the 24 GW of capacities.