Shakti to guard coal quality, source till auction begins

31 July 2017

Data on different sources of coal and its quality to be offered under the Shakti scheme for the reverse auction for private generators with power purchase agreements will be a closely guarded secret until a few minutes before auction, Coal India officials said.

This method of auction, in which bidders will offer discounts on the basis of quality and source of coal, is likely to be cleared soon by the board of the state-run monopoly miner, the officials said on condition of anonymity.

Shakti, or scheme for harnessing and allocating koyala (coal) transparently in India, was cleared by Union cabinet in May to auction long-term coal linkages to power companies.

CIL has invited applications for registration from independent power producers for the auction, which is likely to be held next month. The miner will offer coal of varying quality from different mines depending on the total requirement.

Each power producer will have to bid for discounts on the tariffs mentioned in their power purchase agreements. The one that offers the highest discount for a particular category of coal can enter into a 25-year coal supply contract with the miner. The second highest discount will have the preference of opting for the second best quality of coal on offer and so on.

Coal India executives said the best quality of coal would attract the highest discounts based on the distance of the mines from the powerhouse. This will help reduce cost of power. This methodology has been arrived at to make sure that bids submitted by powerhouses are unique for each category of mines. Power producers with an estimated total capacity of 13,000 mw with power purchase agreements will be eligible for the auction. Of this, about 8,500 mw that is already commissioned is expected to certainly participate in the auction.

After applications are submitted, the Central Electricity Authority will certify the requirement and calculate the total coal required. Subsequently, bidders will have to deposit earnest money, which will be a percentage of the value of coal the company will buy from Coal India.

Coal will be sold at a notified price to these companies. This is the price at which CIL sells coal to existing power companies. The miner has decided to hold such an auction only once and the power companies that stay off the e-auction will not get another chance of securing long-term coal contracts. This will be followed by another e-auction for those that do not have power purchase agreements. The methodology for this category will be the same as for the non-power segment, where the highest bidder will be offered coal.

Source-ET