KOLKATA (miningweekly.com) – The Indian electricity regulator has amended rules to revive an erstwhile window through which domestic thermal power generation companies were able to claim compensation for the additional costs of importing coal in the case that State-miner Coal India Limited’s (CIL’s) failed to meet supply obligations.

The Central Electricity Regulatory Authority's (CERC's) move in effect revives the compensatory model available to domestic thermal power companies between 2013/14 and 2016/17 under which the companies were reimbursed higher costs incurred in importing coal to meet shortfalls in supply from CIL.

According to a CERC notification, claims of compensation will be worked out based on a specific formula applicable on a case-by-case basis as per claims submitted by each thermal power company.

The decision to revive the compensatory window is in response to GMR Energy, which petitioned CERC seeking “pass-through” of additional costs incurred in operating plants with imported feedstock.

Compensation claims will be possible after amendment to the Electricity Act and are expected to benefit a host of private thermal power companies with industry estimating that as much as 15 000 MW of aggregate generation capacity is facing a shortage of coal supplies from CIL.

Private power companies have estimated that their coal import dependency is rising at a yearly rate of 9.3% even though the New Coal Distribution Policy envisaged receiving at least 75% of coal requirements through long-term supply linkages with CIL and the balance through e-auction by CIL and imports.

It was pointed out to the government by these companies that in sourcing coal requirements through e-auction dry fuel bidders were having to pay a 72% higher price compared with coal sourced under ‘notified price’ of long term supply agreements and this higher price could not be passed through by the power generating companies.

The import dependency is unlikely to ease in the short term even after CIL's assurance of 8% higher coal supplies to power companies at 530-million tons during 2019/20, including a 14% increase in volume sales through e-auction in the current financial year. Hence, with sustained import dependency, the compensatory facility will protect operational viability of thermal power plants, the private operators claim.