With the aim of providing coal linkages to the power sector on a priority basis and also keeping the electricity bills in check by offering discounted floor price to power producers on the blocks to be offered to them through auction, both Coal and Power Ministries have held parleys with the Finance Ministry to shortlist a methodology on which the reserves can be put up for bidding.
The Coal Ministry which in the near future plans to auction dry fuel blocks for captive use to power producers on tariff-based bidding basis, is keen to give a discount to the sector in the floor price of blocks, which sources say, would percolate down to the electricity bills of common households. In other words, a slight relaxation in floor price of the coal blocks which would be put on auction for the power sector would be passed on to the common consumer and it would reflect in their monthly bills.
Sources privy to the development told The Pioneer that in a meeting which was presided over by Economic Affairs Secretary in the Finance Ministry Arvind Mayaram, three models were discussed on which the tariff-based bidding of coal blocks for captive power use could be based upon. Apart from Coal Secretary S K Srivastava and other senior officials of the ministry, top level officers from Power Ministry as well as Planning Commission were also present in the meeting.
The first option is that whether direct auction of coal blocks should be done on the basis of their floor price, or the blocks should be bid on the basis of revenue sharing model wherein the company would share the returns with the Government, or the third and last option where the blocks could be put up for auction on market price.
Though officials of both Coal as well as Power Ministries are learnt to have given their views, sources pointed out that a final decision would soon be taken to finalise the model on which the tariff-based bidding would be modelled for the power sector.
After being hit by allegations of having given away coal blocks to various private entities on nomination basis, a cautious Coal Ministry had prepared a roadmap of giving away blocks in future on the basis of three methods - for captive power use the blocks would be given away on tariff based bidding, blocks needed for other industrial use like steel, sponge iron and cement; and blocks to be given out through Government dispensation route for state-owned entities.
Since the power sector has been crying for immediate coal linkages as owing to delays in environmental clearances for coal blocks situated in densely forested areas, thermal plants have been facing acute shortage of the dry fuel, the Coal Ministry wants to expedite the auction process of reserves for the sector.
In fact, in order to incentivise the sector, the Coal Ministry has been seriously thinking of giving discounts to the power companies in the floor price of the captive blocks which are to be put up for bidding. The idea behind giving this freebie to the sector in the Coal Ministry is that by doing so the power tariffs would be reduced and this would show in the household electricity bills.
In this scenario, out of the three models being mulled between the Finance, Coal and Power Ministries, there could be a likelihood that the floor price model may be preferred. Though it would be early to comment on this, sources said.