Government Asks Imported Coal-Based Power Plants to Run at Full Capacity

The step is an attempt to meet peak power demand in the coming months

February 22, 2023


The government has invoked the emergency provision in the Electricity Act to direct all imported coal-based power plants to run at full capacity and ensure the availability of electricity to meet the anticipated peak power demand.

The Ministry of Power has issued guidelines to increase the availability of supply for procurement of power from the untied capacity of imported coal-based plants. The power plants have been asked to blend imported coal with domestic coal.

The guidelines will be valid from March 16, 2023, to June 15, 2023.

The government had issued a similar direction last May to all coal-based power plants to generate power at full capacity. It had directed the states and domestic coal-based power generation companies to import at least 10% of the coal requirement for blending.

The all-India peak power demand touched an all-time high of 201.066 GW on April 26, 2022, surpassing the peak power demand of 200.539 GW met on July 7, 2021.

During the current financial year, it has been projected that the peak demand will reach 229 GW during April 2023. To meet this demand, about 193 GW of power has to come from thermal generating stations. In the likely scenario of a gap in the demand and supply of domestic coal and the essential requirement of maintaining coal stock at generating stations, the use of imported coal needs to be increased by blending it with domestic coal.

The Power Ministry has said the existing power purchase agreements (PPAs) do not have adequate provisions for the high cost of imported coal. The rates at which the power will be supplied to PPA holders will be worked out by a committee constituted by the ministry. The committee will ensure that the benchmark cost of power worked out meets the cost of using imported coal for generating power.

The the fixed charge of power procurement will be as per the PPAs, or as has been mutually agreed between the generating company and the procurers.

The PPA holder can pay the generating company according to the benchmark cost calculated by the committee or at a rate mutually negotiated with the generating company.

According to the new notification, if the generating plant has PPAs with multiple distribution companies (DISCOMs) and one DISCOM does not schedule power according to the PPA, the power will be offered to other DISCOMs, and any remaining quantity will be sold through power exchanges.

Further, if the DISCOM is not able to enter into a mutually negotiated rate with the generating company and is also not willing to procure power at the benchmark cost worked out by the committee, or is not able to make timely payments, then such quantity of power will be sold in the power exchanges.

The benchmark rates worked out by the committee will be reviewed every 15 days, considering the change in the price of imported coal, shipping costs, and other factors.

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