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Advisory group moots opening up of coal sector

December 23: Toeing the line adopted by the government, the advisory group for integrated development for coal, power and renewable energy has suggested that opening up of the coal sector may be necessary, to supplement in a significant way, domestic production by Coal India and a few other companies. 

The group chaired by Suresh P Prabhu (now the Union Minister for Railways) presented its final report to Piyush Goyal, Minister of State (IC) for Power, Coal & New and Renewable Energy, on December 22.

The 8-member group, comprising Suresh P Prabhu, R V Shahi (former Power Secretary), Pratush Sinha, Anil Baijal, Anil Khandelwal, K K Nohria, Partha S Bhattacharya (former CMD of CIL) and Vallabh Bhansali, was set up by the government on June 25, 2014

The group, which held a total of 24 meetings since its formation, keeping in view the urgency in respect of some of the issues, had submitted two interim reports on August 23 and September 7.

The advisory group had also interacted with officials in the ministries of power, coal, new and renewable energy, environment and forest, Cabinet Secretariat, CEA, various public sector companies, officials from state governments, consulting organisations like McKinsey, Bain & Company, KPMG, Centre for Policy Research, the World Bank, Association of Power Producers etc to ascertain their views and suggestions. 

Besides suggesting opening up of the coal sector, the group’s report has also suggested enhancement of coal production in the short, medium and long terms, and has identified areas of improvements in Coal India and its subsidiaries, including CMPDI, and suggested several action points.

The group has also suggested salient aspects of the coal block auction process, coal linkage rationalisation, swapping of coal linkages, need for urgent action on coal linkages to power plants already commissioned, and likely to be commissioned by March, 2015 and the necessity for augmenting railway infrastructure from coal mines to the main railway system, through various options, including joint ventures on infrastructure by CIL etc. 

For the power sector, the group has recommended amendments to the Electricity Act, tariff policy, standard bidding documents (Case I and Case II), approach to and challenges associated with 24x7 power supply, urgent need for distribution sector reforms with targeted actions, including privatization /PPP in distribution,  enhanced role of and improvements in working of CEA, transmission constraints – short term and long term actions.

it has also recommended enhancement of thermal power capacity-addition, advance actions for coal linkages and other inputs for the 13th Five-Year plan projects, need and actions for accelerating hydro power projects, phasing out of old and inefficient thermal power plants which consume excessive fuel etc.

The group’s recommendations on amendments to the Electricity Act include separation of carriage and content in the distribution license, authorisation to central government to adopt measures for incentivising renewable energy generation, making tariff policy obligatory for regulatory commissions.

Among others, the group has also recommended that new coal-based generating plants have the obligation to set up renewable energy generation stations as a percentage of the conventional coal-based power plant as specified by the government, restricting the authority of the state governments to issue directive to prevent open access, to provide options to consumers to choose their power suppliers with the objective of facilitating competition in power supply.

For renewable energy, particularly solar and wind, the advisory group has recommended the sector will require large-scale capacity-addition which will not only balance the skewed power sector profile, but will also lead to price parity with conventional power due to economies of scale. 

Other recommendations in the renewable energy space include Green transmission corridors, incentivising renewable capacity-addition, obligations of coal-based generating companies to set up renewable power generation, priority in purchase of renewable power by distribution utilities, improving the functioning of solar corporation and IREDA etc.

Many of the amendments suggested in the Electricity Act also aim at encouraging and incentivising renewable power development.