Power Min plans fuel blending option for domestic coal projs

The Power Ministry plans to allow upcoming domestic plants to blend fuel from alternate sources if there is shortage in assured supply from Coal India.

The proposal, which is likely to be part of the revised Standard Bidding Documents (SBDs) for upcoming power projects, would be applicable for plants having domestic coal linkages.

According to a Power Ministry document, fuel blending option can be given to projects having domestic coal linkages in case of shortage in Coal India supplies. "The developers have to quote the bids on the basis of heat rate, capacity charge and the first year price of imported coal with blending option on the bus bar of the procurers," it said.

Moreover, the Ministry has mooted "an appropriate formulation in the SBDs" to mitigate the fuel price risk in case of shortfall in Coal India supplies. Such a formulation would be applicable only for domestic coal projects even though many imported coal-fired projects are becoming unviable due to escalation in overseas coal prices.

In case of shortages in supplies from Coal India, the project developer can procure coal from alternate sources. However, this would be subject to "technical limitations with the procurer having the first right of procurement with due liabilities and pre-specified timelines provided for both the parties", among others.

Issues related to severe fuel shortages, tariff revisions and various regulatory hurdles are expected to be addressed in the revised SBDs, which is in advanced stages of finalisation.

The government has already held consultations with power producers on proposed changes in the bidding documents. Regarding blending option for domestic power projects, the Ministry has also suggested that the developer can sell the electricity in open market if the procurer refuses to avail the same.

"In case, the option of third party sale is not exercised by the developer, the risk is to be shared by developers and procurers in the ratio of 70:30 if and accordingly, payment of capacity charge will be made to the developer after deducting the penal recoveries from Coal India," the document said.

Capacity charge implies fixed cost involved in generating power. The country is expected to have new capacity of over 80,000 MW in the 12th Five Year Plan (2012-17), with majority coming from private sector.

Meanwhile, at least 35,000 to 40,000 MW of existing power plants are stranded due to shortage in fuel supplies from Coal India.