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Fuel imports diktat to states, private gencos: Comply or face coal supply cuts, says Govt

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Stepping up pressure on power producers to use imported coal, the Union ministry of power on Wednesday said domestic fuel supplies to state government-run utilities and independent power producers (IPPs) will be cut by 30% effective June 7, if they do not place their indents with Coal India (CIL) or have not already initiated their own tender process for purchase of imported coal for blending purpose.

The ministry, in letters sent to these utilities on Wednesday, added that the allocation of coal from domestic sources would be further reduced to 60% from June 15, if they continued to be non-compliant with the directive to use imported coal for 10% blending. The domestic coal, thus saved, would be allocated to those gencos/IPPs who have already commenced blending, the ministry added.

The power ministry’s letter is also marked to the coal ministry, the chairman and managing director of Coal India and the Central Electricity Authority, indicating their consent to the move.

While many state governments find compliance with the Centre’s directive to have a fuel mix with 10% imported coal unviable due to elevated prices of imported coal, officials from the Uttar Pradesh government said that the Centre was “indulging in arm-twisting tactics and forcing the gencos to purchase costly coal.”

“If some state utilities and IPPs are unable to purchase costly imported coal, how can the Centre force them to do so? Also, if gencos are unable to import 10% coal, how is it fair to cut their domestic coal allocation by 30-40%?”, a UP power department official asked.

Keen to avoid repeat of a serious power crisis, as seen a few weeks ago in many parts of the country, during the months ahead, the power ministry is making all-out efforts to boost power generation and bridge a demand-supply gap.

Earlier, in the letter dated May 28 to state-run and private power plants, the ministry said Coal India would import coal for blending on government-to-government (G2G) basis and supply to them. It also asked the gencos to suspend tenders for direct coal imports that are “under process” to “await the price discovery by Coal India.”

The move followed concerns expressed by many state power utilities and IPPs over the efficacy of the pass-through mechanism announced by the government to recoup the high cost of imported coal.

In the latest letter to state power secretaries, state gencos as well as IPPs, the ministry further said that those state gencos and IPPs that have either placed their indents with CIL or initiated their own tender processes will be allocated domestic coal proportionately based on the likely availability.

Coal India was asked to import coal for blending on government-to-government (G2G) basis and supply to thermal power plants of state generators and IPPs on composite billing basis along with the domestic coal. The ministry had asked all thermal power generators to indicate their coal import requirements for blending by May 31. Since only three states — Gujarat, Madhya Pradesh and Andhra Pradesh — had complied with this by May 31, the government had decided to extend the deadline by a couple of days.

The UP government has told UP Rajya Vidyut Utpadan Nigam, the umbrella body of state-owned generators, that “after considering all aspects, it has come to the decision of not allowing either the state gencos, or the independent power producers in the state to import coal.”

The UP government official quoted above added: “If we are unable to import 10% coal, we can plan to restrict production proportionately and go for planned power outages. But if 40% domestic coal is cut, it means we are being penalised for no fault of ours,” he said.

Terming the Centre’s directive as an attempt to put undue pressure on states, the All India Power Engineers Federation reiterated its demand that since the coal crisis is not the fault of the state power generating houses, the additional cost of coal imports should be borne by the Centre.
Shailendra Dubey, chairman, AIPEF further said that most thermal power stations in all the states are not designed for imported coal and blending imported coal will increase tube leakages in their boilers.

The power ministry recently proposed a fresh scheme to facilitate state-run electricity distribution entities (discoms) to pay up their dues to gencos, which at last count stood at a staggering Rs 1 trillion. The move follows low level of compliance with its recent directives to discoms to clear the dues and the realisation that it largely resulted from a resource crunch with the discoms.

The scheme will allow payment of financial dues by discoms in up to 48 monthly installments. It also includes a one-time relaxation wherein the amount outstanding (including principal and late payment surcharge) on the date of notification of the scheme will be frozen without further imposition of the surcharge. If the scheme works without causing further default by discoms, it will enable gencos, many of which are facing huge liquidity crunch, to continue their operations in an uninterrupted manner.





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