Coal India (CIL) has withdrawn the authorisation for Letters of Assurance (LoAs) for two independent power plants (IPPs) and 60 captive power plants (CPPs) due to their failure to submit Commitment Guarantees (CGs) within the stipulated time.
The move is bound to impact big companies like Tata and SAIL as well as their smaller counterparts who may have to secure fuel from the open market to meet their production needs totalling nearly 1,800 MW.
In a June 5 notice,CIL said that on May 2 the Standing Linkage Committee (SLC) of the coal ministry had asked to withdraw the authorisation for granting LoAs to these power plants based on CILs recommendations.
A CG is a cash amount,equivalent to 10 per cent of the notified price of the annual coal requirement of the power firms,which power firms have to furnish to coal companies.
Tata Powers 120 MW Unit V at Jojobera in Jharkhand and Durgapur projects 300 MW unit 7A in West Bengal are the IPPs,whose LoAs have been cancelled.
Among the list of 60 CPPs whose LoAs have been withdrawn are Bokaro Power Supply Company,a joint venture between SAIL and DVC,Bhushan Power and Steel,Essar Power,Grasim Industries,JK Tyre and Industries,JSW Aluminium and JCT.
Based on recommendations of the SLC,CILs subsidiaries have issued 172 LoAs for a total capacity of 1,08,878 MW till January 2012. This capacity excludes the power utilities already linked to CIL or Singareni Collieries,which were commissioned as on March 31,2009,for which the Central Electricity Authority has agreed to an annual contracted quantity of 304.84 MT per annum.
CIL sources said the company already has assurances for 600 MT for the 11th Plan period and it wont be able to issue fresh LoAs in the 12th plan period owing to the negative balance. It said that the linkage policy needs to be re-worked for has become impossible to supply additional coal to non-core sectors.