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The government plans to push power sector reforms through its new coal supply mechanism, by ensuring that it benefits only those state distribution companies that agree to raise tariffs periodically and cut distribution losses, a government official said. 

Source: ET

SNP Insight

This will give more power in the hand of distribution companies and also increase their accountability towards better performance. And it will give them freedom to choose the quantity of power, the developer and the tariff they want for power purchase. The reverse tariff based bidding process for coal linkage may reduce the tariff. And from developer point view it may secure their investment by providing them a guaranteed power supply agreement. As the investment risk may reduce, it may help the developers to find cheap loan from the financial institutions. So this whole process may improve the gloomy investment scenario in thermal power sector.  

Source: SNP Infra Research