Stressed power assets allege less coal allocation under SHAKTI auction

Power companies fear price rise, Coal India denies any tweaking

Stressed power assets, which were planning to bid for coal under the new SHAKTI auction, have now complained against the national miner for offering a lower coal volume than the demand. The power industry has alleged that Coal India has done so to jack up the price of coal in the auction by more than 100 per cent over the notified price.

The new round of coal auction is for those stressed power projects which do not have any coal linkage and power purchase agreement (PPA) to sell power. SHAKTI, or Scheme for Harnessing and Allocating Koyala Transparently in India, was launched in 2018 to provide the fuel to stressed power units which lacked supply.

In the first round, capacity worth 7,620 Mw received coal in lieu of reducing their power sale price. The latest round will commence on Wednesday under a forward-auction process. Companies will quote bids for the quantity of coal offered by Coal India and its subsidiaries and highest bidders will win.

Industry has now complained the quantity offered by Coal India is less than 50 per cent of the demand. Against the expected demand of 40 million tonne of coal from 8,000 MW of projects, Coal India has offered 11million tonne.

“This induced scarcity in coal offered will earn Coal India a premium of at-least Rs 500 crore,” said a sector executive.

He further added, it is an ill-designed auction process. “At least the coal and the power ministry should test market response from stakeholders before taking a decision to conduct it,” he said.

There is also another caveat that coal can only be utilised by bidder after they find a long/medium term PPA. In a letter to the prime minister’s office, industry representative body Association of Power Producers (APP) said the auction has been primarily designed for maximization of revenue for the coal company.

“There is no rationale for restricting usage of the coal to long/term medium term PPAs. The successful bidder should be free to utilize the coal for generation of power under any of the prevalent market mechanisms available,” said the letter, reviewed by Business Standard.

Coal India official said the company denies these allegations. “Auction of linkages of coal for power are conducted by Coal India in line with the policies and guidelines laid down by the government from time to time. Coal India a sa responsible arm of the government has not attempted to tweak the offer in any manner,” said the official.

APP further requested the PM office, “if this scheme is still pursued despite its glaring flaws, then we suggest that it is crucial to ensure removal of restrictive usage conditions for the coal awarded through the auction.”