India’s power generating companies to face penalty for having low coal stock: Government

The thermal power generating companies (gencos) which do not maintain adequate coal stock will face penalty which includes reduction in fixed charge of their tariff they charge from power distribution companies (discoms). The union ministry of power notified new coal stocking norms which entail that gencos have to maintain adequate stock of coal at their end to avoid any crisis during low coal supply months.

The penalty will be computed based on the shortfall – wherein the fixed charge will be reduced to the extent of shortfall in normative availability of coal. The ministry in its notice has tabulated month-wise stock to be maintained by pithead (near coal mines) and non-pithead (away from mines) plans. For pithead, the stock ranges from 12-17 days and for non-pithead 20-26 days.

The power plants have been instructed to maintain adequate stock during Q4 so as to balance their coal need during monsoon months when coal supply dips. The notice also said the gencos will be graded on a monthly basis on their performance and status of payment to the coal companies.

The highlights of the notification are:

• Gencos to be penalised if selling in open market without discoms’ consent

• The union ministry of power in a gazette notification said that power generating companies (gencos) sell contracted power in the open market without the consent of the buyer (power distribution company or discoms), they would be liable to be penalised.

• “In case the Seller fails to offer the contracted power as per the Agreement to the Procurer and sells this power without Procurer’s consent to any other party, the Procurer shall be entitled to claim damages from the Seller for an amount equal to the higher of twice the Tariff as per the PPA for the corresponding contracted power; and the entire sale revenue accrued from Third Parties on account of sale of this contracted power,” said the notification.

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