A sub-group led by ICICI Bank MD & CEO Chanda Kochhar has made a strong case for an expeditious implementation of coal procurement and pricing mechanism (CPPM) covering all operational power projects. The sub-group appointed by advisory group led by power minister Jyotiraditya Scindia has suggested gas procurement & pricing mechanism (GPPM).
Kochhar submitted the sub-group's report at the third meeting of the advisory group held on Thursday evening. The advisory group has been set up to look into various issues faced by the power sector and suggest slew of measures.
The sub-group has emphasized the need for augmentation of domestic coal production by speedy clearance, mining development operations, merchant miners and policy on sale of surplus coal from captive mines to reduce dependence on coal imports.
Besides, the sub-group has suggested that the state-run GAIL India to be appointed as pool operator, formulation of a separate standard bidding document (SBD) for gas based power procurement to address mismatches during the period of the gas supply agreement and long-term PPAs. A separate policy on peaking power procurement and tariff be formulated to procure peaking power from gas based stations.
The sub-group has suggested two options for the generation capacity to be included in the CPPM pool.
Option I: Entire linkage based capacity (98,000 Mw) operating as on date:10 to 15 paisa per unit increase in variable cost of generation.
Option II: Existing linkage based capacity commissioned after a certain cut-off date (March 31, 2009):50 paisa per unit increase in variable cost of generation. Further, the sub-group has recommended that upcoming capacity scheduled for commissioning till March 31, 2017 may also be included in the pool as and when commissioned by 60 to 70 paisa per unit increase in variable cost of generation.
Projects in advanced stages of construction (expected to get commissioned within XIIth Plan) but not yet allocated any coal may be included in CPPM pool when commissioned based on a differential formula of pooled pricing.
For any new projects beyond XIIth Plan period taken up in future, the price of such coal can be based on a differential formula such that the pricing for operational projects is not disturbed and shall not form part of the CPPM arrangement.
As an interim solution, each project company should have the option to directly import its coal requirement and have the increased variable cost as an automatic pass through in tariffs (based on a Reference price) till CPPM is implemented.
"Power Minister has informed the advisory group that ministries of power and coal are able to sort out their differences on coal pooling and the issue will be taken up by Cabinet Committee on Economic Affairs at its meeting slated for April 23," said Ashok Khurana, director, general, Association of Power Producers and the member of the advisory group.
Furthermore, the sub-group has recommended single window clearance for Coal India (CIL) and captive coal blocks, fuel pass through in all Power Purchase Agreements (PPAs) till normative availability pursuant to CIL being unable to meet its contractual commitments, establishment of an independent coal regulatory authority for effective monitoring and regulation of the sector. Besides, the sub-group has called for rationalization of allocated coal linkages for economic transportation of coal, formulation of a comprehensive plan for improvement of coal handling and logistics facilities and change in coal sector from monopolistic structure to a completely open model.
On the gas based projects and present deficit, the sub-group has called upon the government to accord high priority in existing gas allocation to power sector, diversion of gas from non-core (6 million metric standard cubic meter per day) to core sector (power & fertilizer), augmentation in new allocation to core sectors (10 mmscmd) from ONGC / GSPC gas fields.
India's Installed generating capacity of about 211,800 Mw at January 31, 2013. Of the 211,800 Mw, coal based projects are 122,900 Mw presently operating at average PLF of ~ 74%, gGas based projects 18,900 Mw presently operating at an average PLF of ~ 35%.
Capacity likely to be added from February 1, 2013 onwards till the end of the XIIth Plan period (upto March 31, 2017) is about 78,500 Mw (71,000 Mw of coal based capacity and balance 7,500 Mw gas based capacity).
The sub-group has suggested two options for speedy implementation of GPPM.
Option I: Common pool for core sectors (both power sector and fertilizer) on equal parity corresponding to 70% PLF for power sector and 70% of demand from fertilizer sector –blending ratio of domestic gas to R-LNG of (67%:33%).
Option II: Pooling of power sector for gas based capacity at 60% PLF with fertilizer sector at 40 mmscmd can result in blending ratio of domestic gas to R-LNG of (67%:33%).
Option III: Fertilizer sector retaining its existing allocation and requirement of power sector at 50% PLF can result in blending ratio of domestic gas to R-LNG of (67%:33%).
According to the sub-group, projects with generation capacity of 7,500 Mw not having gas allocations but which were assured gas availability in future may also be included in pool when commissioned and given 12-18 months for entering into PPAs at regulated tariff under Section 62 of Electricity Act, 2003.
Additionally, the sub-group has argued that gas should be classified as declared goods to avoid variation in tax rates and policy initiatives be taken to expedite international gas pipelines.
Source- Business standard