India likely to allow power plants to swap imported and domestic coal

According to Mining News Pro - The Coal Ministry has set up an inter-Ministerial task force, which would be meeting on Friday to go into the detail of swap of imported and domestic coal, a government official said.

The officials said that at present thermal power plants deep in the interior have to import coal and incur additional transportation costs, while thermal power plants along, or near, the coast source domestic coal and swapping of dry fuel between such plants would reduce fuel costs for both the consuming plants.

Some years ago, few thermal power plants had entered into such swap agreements between themselves and were successful in reducing cost of dry fuel, but officials said that the Ministry was keen to lay down guidelines for such linkage arrangements and avoid risks of disputes between thermal power plants that might arise from possible quality, grade and delivery issues.

While the inter-Ministerial task force will go into the finer details of swap arrangements, the Coal Ministry will not permit a blanket permission for such permission, but instead thermal power plant operators will have to seek approval for each swap agreement after declaration of their existing linkage for domestic coal and import contracts of the respective operator.

Indications are that thermal power companies will be permitted to swap linkages between import and domestic coal on a long-term basis and not in case of single consignments. Another issue to be clarified by the task force is whether the fuel cost saving resulting from swaps will be absorbed by respective thermal power operators or mandatorily passed on to power distribution companies through suitable provisions in the power purchase agreements between plant operators and electricity distribution companies.

Earlier this year, the government had allowed swapping of domestic coal linkages between two thermal power plants operated by the same companies even though each of the plants might have linkage agreements with two coal mines at different locations.