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Power cos hit by mining delays can get coal over tapering linkage

New Delhi | Updated: Dec 27 2013, 04:15 IST

The government on Thursday provided relief to companies facing delays in the development of their captive coal mines by offering them additional supplies from Coal India over and above the quantity offered under the terms of ‘tapering fuel linkage’.

The decision was taken by the Cabinet Committee on Economic Affairs, which approved a coal ministry proposal to revise the existing policy to benefit nine out of the 24 thermal power projects with tapering linkage.

This would ensure adequate fuel for Essar Power's Mahan and Adani Power's Tiroda projects, Damodar Valley Corporation's Mejia, Gujarat State Electricity Board's Ukai and Mahagenco's Parli project. Some units of power projects by Sterlite, GMR, Chhattisgarh State Electricity Board and Gujarat Mineral Development Corporation would also benefit from the government's decision.

Tapering linkages are temporary provisions of fuel to end-use projects aimed at helping them to tide over the delays in development of captive blocks. Coal supplies under this arrangement decrease gradually in line with the progress on linked captive coal blocks.

Under the current policy, tapering linkage is provided for only three years — meeting 75% of a plant’s requirement in the first year, 50% in the second and 25% in the third — from the normative date of power production.

Though the tapering linkage under the existing system will continue for these nine projects, they will also get additional coal supplies for three years (till September 30, 2016), or for the period that their captive coal mining projects remain affected due to government policy, or till such time the production actually starts from the blocks, whichever is earlier.

While the coal quantities admissible under Tapering Linkage Policy will be supplied through fuel supply agreements (FSAs), the additional quantities will not be guaranteed and will be supplied on a Memorandum of Understanding (MoU) basis, subject to availability of coal.

It has also been proposed that the position would be reviewed at the end of the first, second and third years by the ministry of coal along with the ministry of power and Planning Commission.

In all, 11,000 MW of power capacity, entailing an investment of R60,000 crore, has been identified for tapering linkage under the terms of new FSA by CIL, where it is signing supply agreements with power capacity totalling 78,000 MW getting commissioned till March 31, 2015. So far, it has signed 157 FSAs for a capacity of 71,145 MW.


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