CCEA approves new Coal Linkage Policy 2017

The coal allocation of linkages in future will be transparent and bidding based, barring some exceptions as per Tariff Policy.

Created On: May 18, 2017 15:01 ISTModified On: May 18, 2017 14:50 IST

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi, on 17 May 2017 approved  the new Coal Allocation Policy for Power Sector 2017- SHAKTI (Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India).

For this purpose, the cabinet approved signing of Fuel Supply Agreement (FSA) with Letter of Assurance (LoA) holders of Thermal Power Plants (TPPs).

Allocation of coal linkages for power sector will be based on auction of linkages or through Power Purchase Agreement (PPA) based on competitive bidding of tariffs except for the State and the Central Power Generating companies and the exceptions provided in Tariff Policy, 2016.

Coal drawal will be permitted against valid Long Term PPAs and about to be concluded Medium Term PPAs. The FSA ensures that all projects with linkages are supplied with coal as per their entitlement. This will ensure the rights of coal supplies for FSA holders and signing of FSA with LoA holders.

Moreover, the coal allocation of linkages in future will be transparent and bidding based, barring some exceptions as per Tariff Policy. It attempts to make optimal allocation of the vital natural resource across the power units.

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Highlights of SHAKTI (Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India)
• Thermal Power Plants (TPPs) having LoA shall be eligible to sign FSA after ensuring that the plants are commissioned, respective milestones are met, all specified conditions of the LoA fulfilled within specified timeframe.
• TPPs, part of 78000 MW, that could not be commissioned by March 2015 shall now be eligible for coal drawal if the plants are commissioned before March 2022.
• Actual coal supplies to all TPPs shall be to the extent of long term PPAs or medium term PPAs to be concluded in future.
• Future coal linkages shall be granted to Central and State Gencos on recommendations of Ministry of Power or shall be granted on auction basis for Independent Power producers (IPPs) with PPA based on domestic coal or on the basis of auction where bidding for linkage shall be done over the Notified Price of Coal Company.
• Coal linkages will be earmarked to the states where any linkage quantity unutilized for two years shall lapse.

Policy directions will be issued by the Union Ministry of Coal and Ministry of Power and will be implemented by CIL (Coal India Ltd.) / SCCL (Singareni Collieries Company Ltd.) and different power entities of the State and Central Government.

The coal linkage to the power sector is governed by provisions of the New Coal Distribution Policy (NCDP), 2007. Under the NCDP, a system of issuance of LoA was introduced wherein requests for Linkage/LoA are forwarded to MoP for its recommendations.

These recommendations are placed before the Standing Linkage Committee (SLCLT) which authorizes issue of LoA.

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