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Bidding norms under SHAKTI-II coal auction raise concern

Last updated on: February 13, 2019 17:31 IST

Earlier bidders in the SHAKTI auction were finding it difficult to meet their PPA obligations owing to shortfall in coal supply. The industry lobby has urged the Centre to review the guidelines and allow former participants as well.

The second round of coal auction under the Centre’s SHAKTI scheme for stressed assets will keep out former winners and bidders.

Private power players have raised concern with the cabinet secretary that bidding guidelines under SHAKTI-II keep out several players in need of coal.

Bidding under the Scheme for Harnessing and Allocating Koyala Transparently in India (or SHAKTI) is for power units with power purchase agreements (PPAs) but no long-term coal supply.

 

Under the scheme, state-owned Coal India offers assured supply to units through bidding.

The units have to quote the discount in their power tariffs they would offer after getting cheap coal from the company.

Power developers contracted the offered amount in the first round, conducted in September 2017.

Leading private sector players bid for the coal offered by Coal India, quoting discounts in their power tariffs in range of 1-4 paise per unit.

Adani Power, Lalitpur (Bajaj Hindustan), KSK Mahanadi, GMR Energy and GVK were among the units approved for coal supply under SHAKTI.

The second round, however, could keep these units. The Association of Power Producers (APP), in its latest representation to the cabinet secretary, has said the new guidelines disallow past participants.

“The scheme document of SHAKTI II states that ‘maximum allocable quantity’ is 80 per cent of the maximum eligible quantity … It is clear that the shortage of 20 per cent of bidders' requirements was built in to the scheme document itself, and the SHAKTI policy as approved by the cabinet did not restrict the coal to 80 per cent of the requirement,” said the letter reviewed by Business Standard.

The APP said the earlier bidders in the SHAKTI auction were finding it difficult to meet their PPA obligations owing to shortfall in coal supply.

The industry lobby has urged the Centre to review the guidelines and allow former participants as well.

CRISIL in its earlier report had estimated power assets of close to 19 GW, of the 40 GW identified stressed power assets, could participate in SHAKTI-II.

“Our assessment of the 34 power plants suggests 19 GW of the 40 GW capacities do not have medium- or long-term PPAs, and hence, can participate in SHAKTI-II provided they meet other eligibility criteria set by Coal India for participation in the auction.

"Successful bidders under SHAKTI-II may find it difficult to secure long-term PPAs, given the high fixed cost of many of these projects,” CRISIL said.

Photograph: Rupak De Chowdhuri/Reuters

Shreya Jai in New Delhi
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