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The Centre is likely to be lenient towards power generation companies that have made substantial investments in their end-use projects but have lost allocation of captive coal blocks without any major fault of the promoters. These projects, that could run into a capacity of close to 10,000 MW, may be given long-term coal linkage from Coal India subject to the availability of the fuel. If implemented, the plan would benefit companies such as Adani, Essar, Tata Power, Hindalco, DVC, Gujarat State Electricity, Mahagenco, Sterlite, GMR Energy. Several projects of these companies were already in the list of entities (about 11,000 MW) that would get tapering linkage (short-term linkage given to projects for a period of three years till the time their captive coal block comes into operation). However, due to de-allocation or further delays in the operationalising the captive blocks, these projects would be without any coal linkage.

Sources said in such cases where despite promoters best efforts there are delays or de-allocation of coal blocks, tapering linkage could be converted into long-term linkage by CIL subject to availability of coal. CIL, which has signed long-term FSA for about 60,000 MW of capacity, would also be able to divert some coal from this list if the companies on the frozen list fail to meet agreed the milestone on end use projects or delay in signing sign PPAs with customers. Any additional coal produced by CIL may also go to this category of power project developers. “We could consider such change on a case-to-case basis to see that willful defaulters and those facing criminal investigation are not benefited,” said the official.

The change is policy has also been supported by an inter-ministerial group that is looking into the allocation of coal blocks. The power ministry has also favoured coal linkage for projects that have made substantial investment in power projects but are now without any assured source of fuel. A case in point for a re-look in the policy of coal linkage is the Tiroda projects of Adani Power Maharashtra. While a portion of the 1,980 MW project has signed FSA with CIL, about 800 MW capacity was supposed to run on coal coming from captive blocks - Lohara West and Lohara Extension. The captive block has now be de-allocated by coal ministry (as the area is near a tiger reserve that prevented the company to get stage 1 forest and environment clearance for the mine) and even though the capacity is expected to come on stream soon(with an investment of close to Rs 9000 crore), there is no guarantee on long-term coal supply. This tapering linkage could be considered for long-term coal linkage of 20 years as the captive coal block was lost without any fault of the promoters. The coal ministry has recently ordered de-allocation of 25 coal blocks from a list of 61 that it is reviewing.

While there are deliberate cases of delay on part of promoters to get green clearances for coal mining projects in few cases, there are also cases where delays were without any lapse on part of the developers. It could be noted that Essar has made investment of close to INR 3,257 crore on end use project related to Chalka captive coal mine that has been de-allocated now.

Sterlite and GMR Energy has invested INR 8,287 crore and INR 4,800 crore on power projects related to Rampia and Dipside Rampia coal mine that has be de-allocated now. Similar is case with Hindalco and Tata Power.

Land acquisition is yet to begin for Mahanadi & Machakata captive block, which has been allocated to Gujarat State Electricity Board's Ukai project and Mahagenco's Parli for meeting their fuel requirements. Similarly, DVC is facing hurdles in acquisition of land for starting mining work at its captive block, Khagra Joydev & Barjor North. In other words, these mines are unlikely to start production in three years.

The life of fuel supply contract under tapering linkage is three years, which expires automatically as there is no provision for extension of the validity period.. The quantity of coal supplied in the first year is 75 Percent of total requirement of the plant. The quantity reduces to 50 Percent and 25 Percent in the second and the third years, respectively.

Source-On Request