Finance Minister Pranab Mukherjee will chair a high-level meeting on Monday to iron out issues that are impeding the commissioning of ultra mega power projects (UMPPs). The development comes amid mounting costs of imported coal and acute paucity of domestically available coal that have led the Power Ministry to project a bleak outlook for some of the UMPPs. The ministry had earlier told the Prime Minister's Office (PMO) that the approved target of an additional 11,000 MW power generation in the 12th Plan may not be fulfilled with imported coal price soaring to $120 a tonne and domestic supply side issues remaining unresolved. Ministers from power,coal and environment would be among those attending the meeting. The Association of Power Producers too in their recent representation to the Power Ministry had voiced these concerns and sought the intervention of the government. The Finance Minister is likely to be apprised of Coal India's (CIL) production shortfall that the company would be able to supply only 347 MT as against a need of 410 MT this year. In addition,as against the need for 615 MT by 2016-17 (the terminal year of the 12th Plan),CIL's projected supply would be restricted to 415 MT,leaving a shortfall of 200 MT. The UMPPs at Krishnapatnam (Reliance Power) and at Mundra (Tata Power) are likely to be impacted on account of coal paucity. Mukherjee is also expected to resolve CIL's persistent refusal to sign Fuel Supply Agreements (FSAs) with the power plants in view of the precarious coal supply position. For the past two years,CIL has been supplying the power utilities mostly through ad-hoc arrangements. The company has offered to sign FSAs for only 50 per cent of the linkage quantity and for five years instead of meeting at least 85 per cent of the need for the stipulated 25 years,the power ministry told the PMO. With coal exporting nations such as Australia and Indonesia imposing taxes/levies on coal exports the uncertainty among the UMPP developers has increased. "In case of such events,the developer has to bear the entire legal,regulatory and political risk affecting supply of price of coal," a senior Power Ministry official told The Indian Express. In its note to the PMO,the power ministry said,"The worst affected would be those developers,who have quoted abnormally low level tariff while bidding through the tariff-based route coupled with non-escalable energy charge for the entire term of the Power Purchase Agreement." Besides,the power producers who quoted "fully escalable" fuel charge would only get partial compensation as the escalation is linked to the Wholesale Price Index of domestic coal,which would not capture fully the much higher cost of imported or e-auctioned coal. The meeting is also expected to deliberate on the suggestions of the BK Chaturvedi Committee on raising the prices of domestic coal to make imports of the fuel more attractive through the price pooling mechanism.
