The Cabinet Committee on Economic Affairs (CCEA) today approved the following mechanism for supply of coal to power producers:

(i)    Coal India Ltd. (CIL) to sign Fuel Supply Agreements (FSA) for a total capacity of 78000 MW including cases of tapering linkage, which are likely to be commissioned by 31.03.2015. Actual coal supplies would however commence when long term Power Purchase Agreements (PPAs) are tied up.

(ii)   Taking into account the overall domestic availability and actual requirements, FSAs to be signed for domestic coal quantity of 65 percent, 65 percent, 67 percent and 75 percent of Annual Contracted Quantity (ACQ) for the remaining four years of the 12th Five Year Plan.

(iii) To meet its balance FSA obligations, CIL may import coal and supply the same to the willing Thermal Power Plants (TPPs) on cost plus basis. TPPs may also import coal themselves. MoC to issue suitable instructions.

(iv)   Higher cost of imported coal to be considered for pass through as per modalities suggested by CERC. MoC to issue suitable orders supplementing the New Coal Distribution Policy (NCDP). MoP to issue appropriate advisory to CERC/SERCs including modifications if any in the bidding guidelines to enable the appropriate Commissions to decide the pass through of higher cost of imported coal on case to case basis.

(v)   Mechanism will be explored to supply coal subject to its availability to the TPPs with 4660 MW capacity and other similar cases which are not having any coal linkage but are likely to be commissioned by 31.03.2015, having long term PPAs and a high Bank exposure and without affecting the above decisions.

Background

A proposal had earlier been moved for approval of CCEA for import of coal by CIL in order to meet the shortfall in the domestic coal requirement of the thermal power plants (TPPs) from time to time.

In the meeting held on 05.02.2013, the CCEA had laid down certain guidelines for import of coal on cost plus basis/pooling of prices and also directed formation of an Inter-Ministerial Committee (IMC) to consider the cases of power plants with aggregate capacity of about 16000 MW which would be commissioned by 31.03.2015 but are not having any linkage for supply of coal. On the basis of the recommendations of IMC, the matter was further considered by CCEA in the meeting held on 22.04.2013. The CCEA inter-alia directed to consider the feasibility of higher cost of imported coal being allowed as a pass through in case of PPAs signed on competitive bid basis.

The revised proposals submitted by Ministry of Coal (MoC) in pursuance of the above directions and in consultation with Ministry of Power and other Ministries were considered by the CCEA at its meeting today.

SH/SK

(Release ID :96682)

Coal supply mechanism allows Fuel Supply Agreements and imported coal pass-through for thermal power plants under specified contractual conditions. A national mechanism directs Coal India Ltd. to sign Fuel Supply Agreements for capacity likely to be commissioned by the prescribed date, with supplies conditioned on long term PPAs. Domestic supply percentages of Annual Contracted Quantity are fixed for plan years; CIL may import coal to meet remaining obligations and supply on a cost plus basis while plants may import directly. Higher imported coal costs are to be considered for pass through under modalities to be coordinated with regulatory commissions, and Ministries will issue supplementary orders to implement the New Coal Distribution Policy and related bidding adjustments.