Ministry of Power modifies norms for pass-through of cost of imported coal

They requested for a suitable methodology to determine the impact on the tariff of mandatory blending of imported coal.

Published: 28th May 2022 09:03 AM  |   Last Updated: 28th May 2022 09:03 AM   |  A+A-

Image used for representational purpose only. (File Photo)

Image used for representational purpose only. (File Photo)


NEW DELHI: The Ministry of Power on Friday said it has modified norms for pass through of higher cost of imported coal used by domestic thermal plants having power supply agreements with discoms under tariff-based bidding.

The ministry, in a statement, said domestic coal-based power plants whose tariffs have been determined under Section 63 of the Electricity Act have raised concerns about the pass-through of the increased cost in tariff if imported coal is used.

They requested for a suitable methodology to determine the impact on the tariff of mandatory blending of imported coal.

The ministry said it has examined the request in detail and a methodology has been finalised in consultation with the Central Electricity Authority (CEA), which was discussed in a meeting held on May 20, 2022 with the stakeholders.

Based on the discussions, it said, "the methodology has been revised to make it in line with the existing methodology being adopted by the CERC (Central Electricity Regulatory Commission)."

 In light of the present circumstances, and in continuation of the directions to import coal for blending, using the powers under Section 11 of the Electricity Act, the ministry has directed that the methodology shall be used by the generating companies supplying power under Section 63 of the Act (projects won on tariff-based bidding) and state governments/discoms will calculate the compensation due to blending with imported coal.

The mechanism for billing and payment for these plants shall be as per the PPA (power purchase agreement).

However, it stated that to enable generating companies (gencos) to import coal with adequate cash flow, the provisional billing shall be done by the gencos on a weekly basis.

Payment of at least 15 per cent of the provisional bill shall be made by the procurers within a week from the date of receipt of bill, it stated. This provisional billing and payment shall be subject to reconciliation during final billing and payment on a monthly basis as per the PPA.

In case of default of payment of 15 per cent of the weekly provisional bill, the genco shall be free to sell 15 per cent power via the power exchange. The gencos shall ensure blending with imported coal and maintain coal stock as per extant norms and the directions issued by the ministry from time to time, it stated. This direction is for coal imported for blending by such domestic coal-based power plants up to March 31, 2023.

The ministry has issued directions to gencos using the powers under Section 11 of the Act in the light of current circumstances due to a sharp increase in electricity demand.

It stated that with soaring power demand and power shortage in some areas, the generation needs to be maximised.

The ministry added that despite efforts to increase the supply of domestic coal, there is still a gap between the requirement and supply of coal, because of which the dry-fuel stocks at the generating stations are depleting at a worrisome rate.

Taking note of the fact that blending of imported coal to the extent of 10 per cent is not happening as stipulated, the ministry issued directions to all gencos on May 18 that if the orders for import of coal are not placed by them by May 31, 2022 and if the imported coal does not start arriving at power plants by June 15, 2022, the defaulter gencos would have to import coal to the extent of 15 per cent (to meet shortfall of imported coal in Q1) in the remaining period up to October 31, 2022.


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