Private electricity generators object to the latest coal linkage auction

Private electricity generators have expressed their concern over the latest auction for coal linkage being conducted by Coal India (CIL) for power plants without power purchase agreements (PPAs). In a letter to Union coal minister Pralhad Joshi, the Association of Power Producers (APP) has claimed that the auction methodology is not in line with the recommendations of the high-level empowered committee (HLEC) which was constituted to address issues of stressed thermal power projects.

Power producers claim that there are “high risk” factors associated with the two-step auction process as only plants which manage to secure PPAs within two years after the auction will receive coal. There is a minimal possibility of any private power plant getting access to the coal awarded in this auction since there are no visibility of PPAs in the near horizon. The last major bid for long term PPA was held in 2016 by Telangana. Power producers also said that the auction involves high risk of forfeiture of bid security, which is about Rs 1 crore per lakh tonne. A 600 MW coal-based plant, at 85% PLF, roughly uses 26-28 lakh tonne of coal every year.