Coal India will conduct auctions under government’s Shakti Schemefor entering into long term coal supply contract with some 12,000 mw of independent power producers that have long term power purchase agreements with state distribution companies but does not have coal supply contract.
SBI Caps which has been appointed as the transaction advisor for Shakti by Coal India, has advised that this category of independent power producer would be taken up first.
Coal India will issue notice inviting applications on Friday from the independent power producers. They would have to submit their applications within 15 days following which the auction would be conducted by MSTC within the first week of August.
The auction will be based on tariffs the power producers will charge from the distribution companies. The company that bids for the lowest tariff will be eligible for receiving coal from the monopoly.
According to coal sector experts, 1,000 mw of power capacity requires around 4.5 million tonnes of coal. Going by that calculation Coal India may offer upwards of 50 million in the auction.
The tenure of the coal supply contract would be equal to the tenure of the long term power purchase agreement. It is expected that the distribution companies will pass on the reduction in tariff to its consumers.
Ensuring coal supply to this category of power producers will serve dual purpose. While it will help Coal India sell 50 million tonnes of additional coal each year for the next 20-25 years, it will also allow these power producers to ensure a steady flow of revenue a large number of which were languishing due to want to coal.
It will also help banks, in that, coal supply would ensure their loans are serviced regularly.