VITAL INDUSTRY UPDATES – 26/06/2015

June 26, 2015 4:18 pm Published by

Coming, future coal linkages for the power sector

After reaching a consensus to auction coal linkages for the unregulated sector, the Coal Ministry now plans to offer future coal linkages to the power sector as well.

According to the minutes of the meetings of the inter-ministerial committee looking into the issue, the Coal Ministry has sought comments from the Power Ministry on a proposed auction methodology for the sector framed by SBI Capital.

According to the proposal, coal linkages will be auctioned by the State electricity distribution utilities (discoms) and the lowest bidder in terms of tariff will win to ensure that benefit of lower coal costs are passed on to the consumers.

The linkages are proposed to be given for a period of seven to 25 years with a strong preference given to the 25-year tenure, as it would help in having a long-term mine planning, rail infrastructure and power planning. SBI Capital’s proposed methodology has suggested that a single discom or a group of discoms will invite competitive bids and transfer the linkage to the winner.

It recommended that the discoms should arrange all clearances and invite the bids on a ‘plug and play’ basis. The proposals also recommended that Coal India Ltd should earmark a coal mine and Indian Railways should ensure evacuation infrastructure to ensure more bid certainty and lower tariff.

“The competitive bid can be conducted as modified Case I bid takes place where in the power plant can be located anywhere. Therefore, competing bidders may have different transportation, transmission and washing cost. Bidders would be required to quote separate figure for variable charge and fixed charge. Based on this, a levelised tariff would be used to select bidders with the L1 (lowest bidder) getting preference and so on. The list would be different for each discom,” SBI Capital recommended in its proposed methodology.

Cabinet approval

Meanwhile, a decision on auctioning of coal linkages for the unregulated sector is expected to get a Cabinet approval by early July. A senior Coal Ministry official said that comments have been received for the draft policy put out by the Ministry earlier this month.

At the meeting of the inter-ministerial committee held on June 4, a request from the Ministry of Steel to allocate coal linkages to Government and Public Sector Units, like in the case of coal block auctions, was rejected.

At the meeting, it was pointed out that this would distort competition as private sector shall have to bid for the linkages while public sector would be allotted the linkages.

 

Thai delegation visits Mumbai Port

 A delegation from the Ministry of Industry and University of Thai Chamber of Commerce (UTCC) visited Mumbai Port on June 24, 2015.

 The delegation, headed by Mr Veerasak Supprasert, Director, International Industrial Economics, Ministry of Industry, held discussions to understand the structure of Indian industry in three sectors in Mumbai—automobile, rubber products and electric appliances/electronics and components.

 Mr Yashodhan Wanage, IRS, Deputy Chairman of Mumbai Port Trust (MbPT), emphasised on the modes of goods transportation in Mumbai, multimodal transportation and the logistics system, and shared experiences with the delegation. He also dwelt upon various initiatives being taken by Mumbai Port.

 

Coal ministry may allow CIL to hold annual auctions

The coal ministry is considering a proposal to allow Coal India to hold auctions every year for the unregulated sector, instead of every five years as mentioned in a draft released earlier this month, according to officials.

It has also decided to introduce a mechanism to handle issues arising out of supply of coal that is different from the variety promised at the auctions.

At an interactive session organised by Bharat Chamber of Commerce in Kolkata on Thursday, coal secretary Anil Swarup said the ministry has been getting representations urging auctions to be held every year instead of every five years. “We are considering the pros and cons of the proposal and would take a final view soon. The modalities of a mechanism that will take care of difference in quality promised at the auctions and subsequent supplies are also being worked out,” he said.

According to ministry officials, the final model for auctions is likely to finalised by the end of the month. The auction model will have a price adjustment formula that will help Coal India take care of changes in input costs, the officials said.The ministry is replacing its old system of offering coal supply contracts in the non-regulated sector on nomination basis with an auction-linked system.

Among the sectors included in this are steel and cement where the final product price is not regulated. Swarup said the government is planning to bring three large railway projects under special purpose vehicles in which Coal India is likely to hold majority stakes.

The remaining stakes will be shared between the railways and the respective state governments. The SPV, it is believed, will help speed up the projects and can carry additional 300 million tonnes of coal from areas that are now logistically constrained. Estimated investment in these projects are about Rs 8,000 crore.

 

One of these project is a 93-km railway line linking Tori, Shivpur and Kathautia in Bihar, for which a tripartite memorandum of understanding has been signed. Coal India will hold 64% in the proposed venture, the railways 26% and the rest will be held by the Jharkhand government.The second project, which is also vital to Coal India’s supply plans, is a 52-km Jharsuguda-Barpalli track in Orissa. The third project involves a 450-km stretch in Mand-Raigarh Coalfields in Chatishgarh.

The coal secretary said the government is working on framing guidelines for coal bed methane extraction and coal to oil projects.

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This post was written by Atlantic Admin