Indian State coal miners to hold special supply auctions for stressed power stations

KOLKATA (miningweekly.com) – India’s Coal Ministry has directed State-run miners Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) to hold special auctions for coal supply to power projects categorised as nonperforming assets (NPAs) as a result of a lack of fuel supplies.

As per a directive issued by the Ministry, the two coal companies are to start holding the special coal supply auctions for stressed thermal power projects from February next year.

Government officials said that coal supply linkages had until now been exclusively for those power plants which had medium- and long-term power purchase agreements (PPAs) with distribution companies.

Under the new auction for stressed power projects, coal linkages would be offered by CIL and SCCL even though these generating assets have not been able to conclude long- or medium-term PPAs simply because the plants did not have any assured supplies of dry fuel hence forcing financial lenders to put these assets under NPA.

But with the government now offering fuel linkages from CIL and SCCL, these power producers would be required to sell electricity in the spot market across power exchanges and the government trading platforms on a short term basis even without long- or medium-term PPAs with distribution companies.

Since most of these stressed power generating assets – about 34 located across the country – were carrying heavy debts and were defaulters in repayments to financial lending institutions, the government was expected to put in place a mechanism wherein any net surplus generated through the sale of electricity in the spot market or power trading exchanges, would need to be exclusively set aside to meet debt obligations, officials familiar with the initiative said.

As per rules laid down for the holding of special auctions starting February 2020, CIL and SCCL would need to earmark specific mines from which supplies would be assured to stressed power plants including the volume and grade of coal to be offered. Both the miners would also need to put up a calendar of auction schedules specifying the months during which supply auctions would be held, factoring in seasonal variations in demand for electricity and hence the coal demand of respective thermal power plants, the officials added.