Industries with captive power plants want the government to give preference to operational units when re-auctioning of cancelled blocks starts next year. Last week the Supreme Court scrapped 214 coal blocks saying the allocations by the government over the last two decades were illegal. It ordered that the blocks be returned to Coal India.
For the past five to eight years, an aggregate 50,000 Mw of power plants installed by firms in sectors such as steel, aluminium, paper, cement, chemicals and textiles for captive use have been facing challenges in procuring coal. These industries are hopeful that when re-allocation of coal blocks starts, the government will give them preference.
In 2013, Coal India had reduced allocation to captive power projects while renewing its fuel supply agreements. The move pushed up fuel costs for these projects as they were forced to procure coal through auctions or rely more on imports. The Indian Captive Power Producers Association (ICPPA) said it sees the court verdict as backing for its demand that captive power projects be treated on a par with independent power projects for allocation of coal or coal blocks.
Last week, in a representation to power ministry officials, the association pointed out that the government's 'Make in India' drive will benefit if they can get reliable power supply at an affordable price.
Having their own coal mine would ensure regular fuel supply at predictable cost and allow them to produce cheaper electricity in the absence of middle men. "The judgement is a great lesson for all policy implementing agencies. Many of the block-linked enduse plants were futuristic and, hence, first preference should be given to existing industries to avoid speculative holding of coal blocks while re-allocating blocks," ICPPA secretary Rajiv Agrawal told ET.
The association claims that reduced coal supplies have made sizeable captive generation capacity idle, which is resulting in losses. Agrawal said that losing coal blocks is painful for investors and it may have wide ramification for companies and financial institutions that invested in them.
"We hope that proper valuations of operating blocks and infrastructure will be done to lessen these pains. Similarly, some method should be devised so that the investment of time, money and resources to seek permissions of nonproducing blocks are transferred to new allottees," Agrawal said.