A few months earlier, the government had notified miners to take part in tariff-based bidding, after the coal and power ministries agreed on the need to pass on the benefit of cheap captive coal to consumers. "The problem is that the original allotment letters issued to captive miners had no conditions attached. The letters did not specify whether the companies were free to sell power through PPAs or in the merchant market or through tariff-based bidding. So, legally they have not done anything wrong," a senior coal ministry official said. The coal ministry would make changes in the allotment letters through an addendum to make participating in tariff-based bidding mandatory.
The official said a case in point was Jindal Power Ltd (JPL), an arm of Congress MP Naveen Jindal-promoted Jindal Steel & Power Ltd (JSPL). JPL has been operating a 1,000-Mw coal-fired plant at Chhattisgarh's Raigarh since 2008. The plant uses coal from two captive mines — Gare Palma IV/2 and Gare Palma IV/3 — located seven km away.
JPL sold power at the highest price of Rs 4.30 a unit in 2010-11 and Rs 3.85 a unit in 2011-12. "The average rate per unit has fallen over the years and works out to Rs 3.40 a unit now, compared to Rs 3.85 last year," said a company spokesperson. The firm's coal cost comes to Rs 650 a tonne, including Rs 147 royalty, against the cost of Rs 700 a tonne when buying coal from Coal India. He added the company had no choice but to sell power in the open market, as it did not get any long-term PPA.
A total of 29 blocks allotted to 22 companies had started production by March this year. These firms include BLA Industries, Monnet Ispat & Energy, Prakash Industries, CESC, Jayaswal Neco, SEML, Usha Martin, Sunflag Iron & Steel, Electro Steel casting, BS Ispat, Shree Veerangana Steel Ltd, Hindalco, Damodar Valley Corporation and state-owned utilities of Punjab and West Bengal.
Business Standard could not independently ascertain which of these firms had made profits by selling power from captive coal in the open market. But the cost of generating power by utilising coal from a captive block currently works out to Rs 2-3 a unit, or even less, depending on a mine's stripping ratio. On the other hand, the average weighted price in the open market has come down from Rs 5-6 in 2008 to under Rs 3 a unit now.
Source- Business Standard