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Home News Power Sector News Power producers seek protection from fuel shocks

Power producers seek protection from fuel shocks

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CoalPower generating companies have expressed their inability to honour contracts bagged under tariff-based competitive bidding unless they are insulated from increase in fuel prices . The companies have asked the government to set up an expert panel to evolve mechanisms for revisiting the existing contracts. Over the past five years, power projects with 42,065 mw capacity of have been awarded through over 30 contracts.

Association of Power Producers director general Ashok Khurana told media, "We have written letters to Planning Commission deputy chairman Montek Singh Ahluwalia and power secretary P Uma Shankar.

Except for the 4,000 mw each Sasan and Tilaiya pit-head power projects, no other plant awarded on competitive bidding would come up unless they (government) have an expert committee which can do a benchmarking and reopen the contracts. Environment is so bad today."

A senior power ministry official said the government was considering changes in the standard bidding documents for awarding projects in future but no changes were proposed in existing contracts.

Khurana said conditions under which bidding of the projects took place have changed radically. "A spectre of acute coal shortages looms large on the power sector. There is a severe risk of stranding of assets and the associated contracts," he said.

The association, a body representing 13 companies like Tata Power, Reliance Power , Adani Power , Lanco Infratech and Essar Power, told government that signals of plants defaulting obligations are being seen due to fuel and environmental issues.

About 80% of these plants were likely to default on account of shortfall in domestic coal availability, environmental issues involved in captive coal blocks and changes in regulations in coal exporting countries, it said. Khurana said the current contractual framework doesn't protect power companies from coal price changes triggered by any change in law in the coal exporting country. Indonesia has said it would not allow coal exporting companies to sell coal at prices below notified rates after September 23.

Australia issued a draft mining law 10 days ago to impose levy on coal and iron ore projects from next year. On domestic coal front, total deficit by end of 2017 is likely to increase to 226 million tonnes. The power ministry has also cautioned coal ministry that new power producers may default payments to banks if fuel supply does not improve immediately.

The newly commissioned power projects are generating just half of their capacity due to coal shortage and are defaulting power supply obligations with state utilities.

Source- Economic times


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