Kolkata | March 30, 2015: Rating agency ICRA feels, aggressive biddings for coal mines may lead to “significant under-recovery (in fuel cost)” for the power sector winners in the recent coal block auction.
The two rounds of auction saw power producers bagging nine running or soon-to-be-operational coal mines. The blocks are stated to ensure fuel security to 6,000 MW capacities.
Having participated in reverse auction, the winning bidders quoted “zero” cost for producing fuel. Additionally, they promised to pay the government Rs.302 to Rs.1,100 a tonne as revenues. The payables are linked to wholesale price index. ICRA now estimates that the negative bidding will cost the winners of coal blocks Rs.0.39/kwh to Rs.1.02/kwh as under-recovery on a levelised basis over a 25-year period (life of the mine). Aggregate under-recovery is estimated at Rs.800 crore in 2015-16, which is likely to increase to about Rs.18 billion by 2017-18.
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(Source: http://www.thehindubusinessline.com/)