Govt invokes emergency clause to allow compensation for 32 Gw domestic coal based plants

The government has invoked an emergency clause to allow compensation to 32 Gw domestic coal-based power projects for higher costs due to blending of imported coal till March next year.
Power purchase agreements between these plants and the distribution companies have been signed for upto 25 years based on tariff-based competitive bidding under Section 63 of the Electricity Act and do not allow higher prices.

The direction issued on Thursday under Section 11 of the Electricity Act said that coal imports for blending by power plants are not the level mandated by the government due to lack of clarity on compensation. It said the coal reserves continue to dip.


“The methodology shall be used by the generating companies supplying power under Section 63 and state governments to calculate the compensation due to blending with imported coal. The mechanism for billing and payment for these plants shall be as per PPA,” the order said.

It said domestic coal based power plants, whose tariff has been determined under section 63 of the Act have raised concerns about the pass through of the increased cost in tariff if imported coal is used and have requested for a suitable methodology to determine the impact of tariff of mandatory blending of imported coal.

“Their request has been examined in detail and a methodology has been finalised in consultation with the Central Electricity Authority, which was discussed in the meeting on May 20, 2022 with the stakeholders. Based on the discussion, the methodology has been revised to make it in line with the existing methodology being adopted by the CERC (Central Electricity Regulatory Commission,” it said.

For adequate cash flow to power plants, payment of minimum 15% of the provisional weekly bill shall be made by the discoms within a week from receipt of bill from these 32 Gw plants. In case of default, the power plants can sell 15% in power exchange.

Section 11 of the Electricity Act provides that the government may, in extraordinary circumstances, ask a generating company to operate and maintain any station in accordance with its directions.

In April, the union power ministry had asked all power plants using domestic coal to import 10% of their fuel requirement and blend it with local coal.

The power ministry last week said it would increase the coal import target to 15% for power generating plants that were not following its directive to meet 10% of their fuel requirement with imported coal.

The government also invoked Section 107 of the Electricity Act to direct the central power regulator CERC to allow power plants under its watch to increase blending up to 30%.