NEW DELHI | May 04, 2016: The Cabinet on Wednesday allowed states freedom in utilising coal allotted to their power stations, a move power minister Piyush goyal said would reduce cost of generation by 40-50 paise per unit and lead to savings of Rs 25,000 crore per annum in 4-5 years.

Under the proposal, all long-term coal linkages - supply quotas - of individual power plants in a state would be clubbed together and put under the charge of the state government or its nominated agency. Similarly coal linkages of individual power plants of Central generation utilities would be clubbed together and put under the charge of the entity.

States or the Central utilities would then be free to make better use of the allotted coal by using them to fire more efficient plants for higher generation rather than waste them in old, inefficient plant for less-than-desired output.

In case a state decides that it could get better value by sourcing power generated by using this coal to fuel a private power station, the electricty has to be procured through bidding amongst competing private sector plants. The state has to then mention upfront the source, quantity, quantum and delivery point for the power.

In case a state or central utility decides to move around coal among its own plants, the deciding criteria would be on plant efficiency, coal transportation cost, transmission charges and overall cost of power.

Earlier, the government had allowed swapping of coal mines by users so that transportation cost can be reduced for generation of power. The government has allowed coal swapping in 19 blocks which brought down the cost of power generation as users were able to source fuel from mines located nearer to them.

The flexibility in utilisation of domestic coal is also required at this point, according to experts, as the international price of coal has been set at a lower level. The option of cheaper coal imports and increase in production by Coal India and its arms have led to a situation where stocks are piling up.

The proposal is also aimed at improving the consumption of domestic coal by the industry, mainly the power sector, against the backdrop of cheaper imports and high production of the dry fuel in the country.

(Source: http://timesofindia.indiatimes.com/)

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