Private thermal power producers expressed their reluctance to participate in the third round of the SHAKTI coal auction, scheduled to take place next week, citing liquidity crunch. They asked the government to refund the amount of the security of the bid and the processing fees paid by them.
The new auction round is for those power projects under stress that have a Power Purchase Agreement (PPA) to sell power, but no coal link. SHAKTI, or the Harnessing Scheme for Harnessing and Allocating Koyala Transparently in India, was launched in 2018 to supply coal to stressed power units with a lack of coal supply.
In the previous two rounds, which took place over the last two years , approximately 9,389 megawatts (Mw) of power capacity tendered for coal under the SHAKTI scheme. During the last round in February, private players claimed that Coal India was offering less than the required amount of coal.
Units have now complained that the timing of the auction is wrong. "It is inexplicable why the auction is being held so hastily, especially when the unprecedented situation caused by the Covid 19 pandemic has brought stress to power producers. Revenue inflows from power distribution companies (discommodities) have completely dried up and many of them are giving notices to power producers to back down their generation, "the Association of Power Producers (APP) said in a letter to the Prime Minister's Office, Coal and Power Ministries.
Since India announced its lockdown on 22 March, demand for power has fallen by as much as 30%. This is coupled with a number of states backing down generation from a number of units, especially those whose costs are high.
All of this has resulted in coal reserves in power stations and Coal India having a surplus of 30 days or more. State-owned discomfort also has a past debt totalling a record high of Rs 90,000 crore to the genco. The amount due to private units is close to Rs 23,000.
Private players therefore asked the Center to extend the timeline for the auction by 'a month or until business normalcy returns.' It said: 'Bidders who have submitted their bid security and processing fees may be granted a refund of these amounts so that these funds can be used for their day-to-day business operations.'
Senior Coal India executive said that the firm was not conducting an auction, and that its role was simply to provide coal. "Coal India 's role is limited to providing the source-wise quantity required for the auction that it has already provided to the Power Finance Corporation that is conducting the auction," the Executive said.
Sources in the government, however, said that the auction was held on the demand of the sector. "In the previous round, the players claimed that Coal India was offering less coal under auction. Now, we've decided to hold SHAKTI auctions and all other coal link auctions on a regular basis. In such unprecedented times , the government is making coal available to all sectors, "a senior official said.
Private players call this move a means to get rid of surplus coal. As of April 30, 50.89 million tons of coal were stored in powerhouses in India, enough to last 31 days. Coal India has a pit-head stock of about 76 million tonnes, according to the Central Electricity Authority (CEA) estimates. Coal Ministry officials said that since the availability of coal is high, Coal India has shifted its focus away from production. "There's no reason to get rid of it. Coal India is preparing the ground for a post-lock scenario, "said the official.
In April, Coal India removed 114.43 million cubic meters of overload from its open-cast mines. This is 10% more than the same period last year. The removal of overburden (OB) involves the removal of topsoil and rock to expose coal seams in open cast mines. Almost 95 per cent of the production of Coal India comes from open-cast mines.
"As demand has fallen, Coal India has shifted its focus to improving the elimination of overburdens. This would help Coal India to accelerate coal production whenever demand picks up and supplies up without delay, "said a senior coal minister.
