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Stressed power plants may end up buying a higher priced coal in amid of coal auction

To revive stressed power plants government will come up with coal allocations for short-term/medium term power supplies, that would be completed through auction of coal. Power plants that do not have coal and power purchase agreements can participate in auctions and highest bidders get to book coal quantity for the projects.

Private producers are concerned about coal auction for stressed power plants as these auctions may end up paying a price higher than the actual prices. Investors and lenders of stressed projects are pressurizing for assured coal supplies to stressed plants. Desperation of assuring coal supplies by power producers is poised to end-up in aggressive bid, resulting in higher prices. Power producers fear of chances of these projects losing bank guarantees if there is no demand from discoms in two years. Power producers also alleged that CIL may exploit monopoly situation of coal supplies.