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Crunch in CIL supplies: CERC order unlocks Rs 17,000 crore for power firms

Crunch in CIL supplies: CERC order unlocks Rs 17,000 crore for power firms – The Financial Express

The compensation on account of coal shortage would be worked out according a formula prescribed by the CERC on a case to case basis, the CERC said.

The remaining coal are being sourced from other expensive means such as imports and e-auctions. (Representational image)

The Central Electricity Regulatory Commission (CERC) has allowed power companies to claim compensation for the additional cost of coal procured from alternative sources due to Coal India’s failure to meet supply obligations. While such compensation facility was available for the FY14-FY17 period under a modified coal distribution policy, it has since ceased to be in operation.

The industry estimates accumulated ‘receivables’ to power companies on account of this stalemate at around `17,000 crore.

GMR Energy, which filed the petition claiming pass-through of extra fuel cost before the regulator, will be the immediate beneficiary of the CERC decision. The latest regulatory order, invoking the ‘change in law’ clause in the Electricity Act, virtually entitles a clutch of other plants including those of Jindal Steel and Power, Reliance Power, Rattan India, CESC and KSK Group to similar reliefs. In all, about 15,000 MW of capacity is facing shortfall in supplies from Coal India, according to an industry source.

The compensation on account of coal shortage would be worked out according a formula prescribed by the CERC on a case to case basis, the CERC said.

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As per the modified fiats of the New Coal Distribution Policy (NCDP), power plants receive 75% of their contracted fuel quantities through CIL linkages.

The remaining coal are being sourced from other expensive means such as imports and e-auctions. However, the 2013 NCDP allowed power plants to claim higher tariffs for the additional cost till FY17-end.

CERC clarified that power plants receiving coal under the Shakti scheme are also entitled for compensation for any shortfall in supply of annual contracted quantities by CIL.

Private power producers have been writing to the government seeking advisory for pass-through of additional cost of fuel since 2017. On top of that, a number of power plants are still waiting to receive their reimbursements for additional coal sourced before FY17. “There is a protracted process going on right now to determine the exact pass through amount,” Ashok Khurana, director-general, Association of Power Producers, said.

Driven by shortage supply in the wake of sudden rise in electricity demand, power plants across the country imported 61.7 mt of coal in FY19, recording an annual rise of 9.3%. More than 27 mt of coal was offered exclusively to the power sector through e-auctions in FY19 when the highest bidding power plants, suffering under inadequate fuel supply, paid 72% more than the ‘notified price’ of coal. As FE recently reported, power producers have also complained that various subsidiaries of CIL have “suddenly and unilaterally” increased floor prices (reserve price) at which these auctions begin.

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Source: Financial Express