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JUN 19 2013

Coal block owner must sell power on long-term contract

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 19th JUN 2013

The Government has made it mandatory for power companies which have been allocated coal blocks to sell electricity through long-term contracts with distribution utilities; otherwise, they stand to lose their mining permission.

Power plants that are likely to get commissioned shortly or in the next 18 months should get into long-term power purchase agreements (PPA) with the discoms, at least six months before commissioning the plant.

The norm is applicable to companies allocated coal blocks in the previous years. Official sources said that the Power Ministry had asked the Coal Ministry to include this clause in the coal allocation letters.

This decision, taken after deliberations between Secretaries in the Ministries of Coal, Power and Law, is meant to ensure that the benefit of cheaper domestic coal is passed on to consumers, as observed by the Comptroller and Auditor-General of India (CAG) in its last audit report.

The CAG, in its report on allocation of coal blocks and augmenting production, high- lighted that there was a "need for a strict regulatory and monitoring mechanism to ensure that the benefit of cheap coal is passed on to the customer.

Tags

Comptroller and Auditor General Coal Power India

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