To discourage stockpiling of scarce, captive coal blocks, the government is going to alter its proposed policy on merchant power plants mandating that unless mining operations start within three-four years, the coal allocation would stand cancelled.
Such power plants don’t have a long-term, power purchase agreement for sale of their power and instead are entities designed to mitigate shortfalls in power supply in the short run. The capacity for these units is capped at 1,000 mega watts. Such plants are a new concept and given the shortage of coal blocks, the power ministry wants the new policy guidelines in place to avoid the problem of squatters that it encountered in the case of captive power projects. “This is being done so that only serious players get into the business,” said a senior power ministry official who did not wish to be identified.
A captive power project cannot trade its output and is meant to meet the in-house power demands of the project developer.
The government is targeting a capacity of around 10,000MW from the merchant power plants by the end of the 11th Plan, through 2012. This is over and above the 68,870MW capacity-addition target that has been fixed for the 11th Plan.
The government has reserved coal blocks with 3.2 billion tonnes of coal to be alloted by a screening committee from the coal ministry for merchant and captive power projects. Of these blocks, those with total reserves of about 2.4 billion tonnes will be reserved for merchant plants.
Coal blocks are an increasingly scarce commodity. For example, power project developers have already submitted 748 applications for the 15 coal blocks awaiting allocation to by the coal ministry.
“Not only is it difficult to get coal blocks but also very difficult to develop them due to lack of required expertise available in the country today,” a senior executive at a leading private sector power project company said.