Coal Auctions Still Far From Transparent

The SHAKTI scheme, meant to improve coal linkages to power plants, has not revealed bidding details

- Maria Chirayil & Ashok Sreenivas

The SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy was approved in May 2017 with the intent of better allocation of coal to present and future power plants. It aimed to phase out the present Letter of Assurance and Fuel Supply Agreement (FSA)based regime, and instead introduce a more transparent and competitive coal allocation policy. The policy also offered a potential solution to the lack of coal linkages to 17 power plants with capacity of about 15,000 MW, which were part of the 34 power plants (of about 40,000 MW) declared as stressed.

The policy was amended in March 2019 specifically to aid stressed projects based on the recommendations of a High Level Empowered Committee. But two years since the policy’s launch, how has it played out on the ground?

Status quo

Section B(i) of the policy allows granting of coal linkages to Central and State PSUs as well as JVs formed amongst them. Linkages have been granted to 18 projects (22,160 MW) until June 2019 under this section.

Under Section B(ii) of the SHAKTI policy, coal linkages are auctioned to independent power producers (IPPs) who do not have coal linkages but have power purchase agreements (PPAs), based on discounts quoted on the PPA tariff. Over the last two years, there have been two rounds of bidding for coal linkages under this section. For the first round, held in September 2017, 31 applications from IPPs were received, of which 14 were deemed eligible and 10 participated in the auction.

This resulted in allocation of about 27 million tonnes per annum (MTPA) of coal to a capacity of 11,549 MW, at tariff discounts ranging from 1-4p per unit. No information is publicly available regarding the second round of bidding, which took place in May 2019.