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Home News Power Sector News Power projects can share captive coal - Coal Ministry once again favours Reliance

Power projects can share captive coal - Coal Ministry once again favours Reliance

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Anil Ambani-promoted Reliance Infrastructure Ltd.The central government has relaxed captive coal mining norms to allow power companies to divert surplus coal from one of their projects to another.Permission will be given on a case-to-case basis to coal-surplus companies that approach the coal ministry, said a senior government official who asked not to be named.The company’s claim will be verified by the coal ministry before the diversion plan is approved. Permission will be given to only those power projects that are awarded on the basis of tariff-based bidding.

A recent decision by a group of ministers allowing Reliance Power to divert surplus coal from its Sasan captive mines to another power project at Chitrangi in Madhya Pradesh had run into controversy as the permission was given even before mining started at the site. Tata Power had challenged the decision in the Delhi High Court.

The interpretation by the coal ministry augurs well for several power projects. “If companies know that they can use surplus coal for their other projects, the bidding process for tariff-based projects could get even more competitive. This may also help consumers by way of lower electricity charges,” said an official with the Planning Commission who asked not to be named.

However, the regulations bar power companies from selling surplus coal to other companies as only government-owned entities are allowed to trade in coal. Allowing private sector companies in trading will need an amendment to the Coal Mines (Nationalisation) Act, 1973.

The current norms require captive coal mines to hand over excess coal to the central government, which disburses it through Coal India, a company owned by it. In some special cases, the coal ministry permits sale of excess coal on a temporary basis.

"The fact that surplus coal may be diverted need not be mentioned in government documents, as it is already allowed by existing regulations. It makes economic sense to let the company utilise surplus coal from its captive block in another power projects run by it, rather than it seeking fresh coal blocks," said the official.

Till now, 198 captive coal blocks have been allocated by the coal ministry. Only 21 of these blocks are operational so far. Captive mining was allowed to give a fillip to coal production in the country as the government expects a demand-supply mismatch. Planning Commission has estimated a shortfall of 60 million tonne by 2012.

Source - Economic Times


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