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Coal linkage rejig to save Rs 6,000 crore

Rationalization of coal linkages to power plants would help save Rs 6,000 crore, coal and power minister Piyush Goyal informed the Lok Sabha on Thursday.

Replying to questions, the minister said the government was working on a plan under which coal blocks would supply fuel to the nearest power plants. This would be done by swapping coal linkages.

He explained that under present arrangement, most of the power plants have linkages to coal blocks located far away. This leads to heavy expenditure on transportation.

Citing an example, he said recently NTPC and Gujarat State Electricity Corporation entered into a pact for swapping one million tonne of coal, which is expected to save over Rs 300 crore for the state government.

This experiment would be expanded to other states, which would help save Rs 6,000 crore and benefit consumers.

Separately answering a query on whether public sector banks give credit against coal linkages, he said 11 public sector banks have more than Rs 51,000 crore worth exposure to various coal linkages.

Goyal said the new long term coal linkages or Letter of Assurances have not been granted to any sector since 2010 due to low coal production. According to him, availability of fuel was not sufficient to cater to requirements of linkages granted to all power projects.

"The growth in production of coal in India was only 0.2% in 2010-11 and 1.3% in 2011-12 as against 6.1% in 2007-08, 7.8% in 2008-09 and 8% in 2009-10. Hence, the production of coal in the country was not commensurate with the projections of its availability."

Goyal said there were well established procedures for providing coal linkages. Recently, a case came to government's attention where the shareholding of the company was changed after it received permission for coal linkage. Subsequently, the government has denied permission to that entity, he said.

He, however, did not give specific details. Responding to another query, Goyal said the larger focus is on providing coal linkages to independent power projects where the electricity tariffs are regulated.

In case of captive power plants, there is no price control and the price is determined by the market. The minister said no new coal linkage has been given to such plants in recent years due to various factors, including low fuel production.

Source: The Times of India