May27 , 2022

Emergency clause invoked on power plants in national interest: Power Secy



Invocation of legislation to mandate all imported coal-based power plants to operate is a step taken in national interest to increase availability of electricity, union power secretary Alok Kumar told ET. The project developers, however, are worried about the uncertainties regarding implementation.

At a meeting on Friday in the power ministry, most lenders agreed to offer funding support to restart operations of the stressed assets, but developers of these plants are worried about uncertainties in sourcing imported coal and not getting full recoveries at the power exchanges.

Non-compliance of the order that will be in force till October 31 attracts a penalty under the Electricity Act 2003, sources said.

Emergency Clause Invoked on Power Plants in National Interest: Power Secy

Late on Thursday the Centre invoked Section 11 of the Electricity Act, which mandates all imported coal-based power projects to generate electricity at full capacity, with the aim of bringing on stream at least 7 GW of power plants of Essar Power, Coastal Energen in the states of Gujarat, Andhra Pradesh and Tamil Nadu amid a projection that power demand will touch 220 GW in the coming months.

“States have to decide whether to buy or else it will go to the power exchange. We can arrange power; states have to decide whether to pay or do load shedding. To ensure liquidity, payment is mandated on a weekly basis,” Kumar said.

Sources in the power ministry said the indecisiveness of states is holding up these projects from becoming operational. “Imported coal plants were not operating due to lack of adequate compensation or other commercial issues. This order is a win-win for everyone,” a senior government official said.

One of the developers said, “It is a good opportunity for every project that is either not operating, with bank debts gone up or becoming NPA, because they can demonstrate they are competent to operate.”

However, operators of imported coal-based plants have concerns. They are worried whether they will get working capital from banks to restart projects and import coal, and also about having to import coal at higher prices and then getting lower rates on the power exchanges if electricity demand fizzles out. Prices in various market segments of power exchanges vary for different time blocks.

“We are happy the plant gets to operate but there are many implementation challenges. It would have been easier for us if the government ensured offtake at steady prices,” another company said.

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