Tariff-based power projects to be compensated for running plants using imported coal
Premium- The power ministry has allowed increase in cost due to mandatory blending of imported coal as a pass through in tariff even for tariff based projects.
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The government has decided to compensate competitive tariff-based power projects for operating at full capacity using expensive imported coal.
The Union power ministry has under Section 11 of the Electricity Act, 2003, allowed an increase in cost because of mandatory blending of imported coal as a pass through in tariff even for tariff-based projects.
This is expected to help these power projects import coal to run plants at full capacity and meet the electricity demand which has risen sharply.
The power ministry had earlier mandated all domestic coal-based power projects to meet 10% of their requirements through imports and thus prevent fuel shortages from impacting generation.
Power projects where the tariff has been determined in accordance with Section 63 of the Electricity Act are awarded on the basis of producers quoting a fixed tariff for the lifecycle of the project. In such projects, the tariff is fixed without any, or a limited, provision for any escalation because of changes in generation cost.
The power ministry has further directed that the mechanism for billing and payment for these plants shall be according to the power purchase agreements (PPAs). However, to help maintain adequate cashflow to import coal, generating companies have been asked to do provisional billing on a weekly basis.
