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    HomeBusinessDiscoms to mandatorily purchase from ICB plants

    Discoms to mandatorily purchase from ICB plants

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    The Union ministry of power may invoke Section 11 of the Electricity Act, 2003 to make it mandatory for state-run electricity discoms to buy power produced from imported coal. The move follows discoms’ reluctance to buy costlier power from imported coal-based (ICB) units, which were earlier directed by the ministry under the same section to run at full capacity.

    The Union ministry of power may invoke Section 11 of the Electricity Act, 2003 to make it mandatory for state-run electricity discoms to buy power produced from imported coal. The move follows discoms’ reluctance to buy costlier power from imported coal-based (ICB) units, which were earlier directed by the ministry under the same section to run at full capacity.

    Profitable spot market sales were one of the incentives offered to ICB units apart from the promise of cost pass-through. However, things haven’t moved much on the ground as most states refrained from clinching deals with ICBs, due to financial constraints.

    Spot power prices have dropped by half in the last one week on the India Energy Exchange from the highs of Rs 11 per unit, thanks to a moderation in demand.

    Sources said power minister RK Singh hinted at issuing a directive to discoms at a review meeting held in New Delhi with ICB units.

    Gencos said in the meeting that high cost power has few takers among discoms and spot market sales too have become less profitable as prices have dropped.

    The minister is said to have told the gencos that the order to discoms would be passed by Sunday or Monday.

    A genco official who attended the meeting said the power ministry’s directive can be complied with only if imported coal cost is a full and prompt pass-through, without causing any litigation.

    Advance payment by discoms as working capital support is also necessary, he said. He also cited lenders’ continued unwillingness to extend any new loan facility to ICB units.

    On May 5, the ministry had made it obligatory for imported coal-based gencos to run at full strength, while asking other gencos to blend 10% of imported coal of their requirement.

    Given the critical situation of coal stock in the country, Singh asked all stakeholders to take the directives seriously.

    He told gencos that they will have to import 15% of coal instead of 10% and their domestic quota would be reduced by 5%, if the import order is not complied with.

    The Centre’s moves are aimed at making 8,000 MW of ICB capacity operational.

    Among the power producers, while Tata Power Company, which has a 4,000 MW plant at Mundra, has already moved the Central Electricity Regulatory Commission (CERC), asking for higher tariffs than set by a designated committee, Essar Power’s 1,200 MW plant in Salaya is ready to start operations.

    Speaking to FE, an official from Essar’s Salaya plant said that the company would soon be signing a tripartite agreement with the lenders and the Gujarat Urja Vikas Nigam Limited (GUVNL). He, however, said tariff fixed by the ministerial panel needed to be revised to factor in a $8-10/tonne rise in prices of coal imported from Indonesia since April 28.

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