Private power firms against exporting discounted coal

21 May 2018

Damodar Valley Corporation and a state-owned distribution company in West Bengal that are receiving fuel at a discounted price from Coal India on long-term contracts must sell their electricity locally in India and should not be allowed to export that, especially at a time when the country is facing a coal supply scarcity, said a clutch of private power companies.

They have raised objection through the Association of Power Producers, which urged the coal and power ministry to stop export of power generated from coal priced at a discount and meant for consumption in India. This comes after both public sector power companies won bids to supply electricity to Bangladesh.

In a letter to both the power and coal ministries, Ashok Khurana, director-general of the association, said while Coal India is unable to meet its obligations under fuel supply agreements, usage of domestic coal for power supply to Bangladesh would be very inequitable for domestic generation companies which are unable to meet their power purchase obligations for want of adequate coal. ET has seen a copy of the letter.

“It is requested that necessary clarification may be issued so that cross-border supply of power should be from imported coal or from fuel procured at e-auction. This can be taken up with Bangladesh Power Development Board, and an undertaking from bidders may be made part of the bid, saying that they will not use domestic linkage coal for such cross-border supply of power,” Khurana said in the letter.

Bangladesh and India have created a power corridors of 1000 mw in each sides. Following this, Bangladesh now intends to buy 1000 mw of power from Indian producers and has recently invited bids in two tranches.

Damodar Valley Corporation and West Bengal State Electricity Distribution Company have emerged successful bidders for the first tranche of 500 mw that was concluded sometime back. These PSUs have indicated that the source of fuel would be coal priced at a discount and procured through supply contract from Coal India.

Damodar Valley would be selling 300 mw through NTPC Vidyut Vyapar Nigam at a levelised tariff of Rs 3.84 per unit in the short run.

While it has also won the bid for supplying 300 mw at a levelised tariff of Rs 5.28 per unit in the long run.

Source of coal for both the short and the long run would be domestic coal procured at a discount from Coal India.

Its bid was followed by West Bengal State Electricity Distribution Company offer for supplying 200 mw at Rs 3.97 per unit in the short run using domestic discounted coal.

“The second tranche of bid results are expected to be announced this week where PSUs like Gridco have also participated. They may be using coal meant for domestic consumption,” said a senior power sector executive.

A power sector executive said: “Almost 250 mw power is flowing to Bangladesh from West Bengal’s power pool since October 2013. Their contract has been extended several times and there is no mention of source of coal for generation of power for export in the guidelines.”

A former NTPC official said the cross-border policy issued by the Centre for exporting power from India stipulates that one-time approval is required for exporting electricity by discoms or public sector entities, if surplus capacity is available and it is certified by a distribution licensee. He also said that any coal-based Indian thermal project other than public sector undertakings shall be eligible for power exports to neighbouring countries only if surplus capacity is certified by a designated authority.

“It is likely that this requirement has not been adhered to uniformly by all bidders. This means that any bidder securing bids based on coal procured at notified price for power generation, or from captive mines, would lock in part domestic coal resources for external consumption for several years, thus hampering domestic consumers’ interest and would be in violation of policy framework,” said Ashok Khurana.

Source: THE ECONOMIC TIMES