Two months after it was approved by the Cabinet, the Power Ministry has sought an amendment in the Mines & Minerals Development and Regulation Act to exempt power projects from competing for coal blocks so that electricity tariffs are minimal. “Coal blocks have to be made available for assured allotment to the lowest tariff bidders (of power projects) to extract maximum efficiencies in coal mining and power generation for the benefit of consumers who can avail of least power tariff,” it recently wrote to the Coal Ministry.It has asked that future coal blocks be “earmarked” for pit-head generation stations that would preferably serve more than one state as well as for projects that would be set up in high power demand centres outside the coal-bearing states. “It would be desirable to allot lease of coal blocks initially for 25 years corresponding to the provisions of long-term power purchase agreement, with a clause for renewal of lease on terms to be decided by the government after this 25-year period,” it added.Last November, the Cabinet approved an amendment in the Act to introduce competitive bidding in handing coal blocks to captive users such as iron and steel, power and cement companies. After their technical bids are evaluated, blocks would be allotted to the company which pays the highest lumpsum amount.Earlier, the Coal Ministry allotted blocks on approval from an Inter-Ministerial Screening Committee. With coal demand rising sharply and the number of applications increasing, the old process came under flak on grounds of subjective screening. The new norms were framed on instructions from the Prime Minister-headed Energy Coordination Committee.However, power utilities had opposed competitive bidding arguing that priority accorded to the power sector would cease in the new regime. Since power firms could not pay a higher price, which steel and cement companies could, they would not be able to compete with the latter.
