Coal is the widely used input for power generation in the country with nearly 56% of the electricity is produced using coal. But coal’s availability is not adequate and international price is high compared to the domestic price. Inadequate domestic coal, rising imports and high price for imported coal necessitates government intervention while allocating the available coal among power producing firms. India imported 212 mn tonnes of coal in 2014-15.

Since coal mining firms are public sector companies, allocation of coal among power generating firms becomes an important issue. Similarly, pricing of coal is also vital problem.

In these conditions, the government has designed coal linkage policy that allocates coal among different coal using thermal power plants, with the active guidance of coal assigned state governments.

The central government designated the Central Electricity Authority to design and issue methodology for coal linkage. States who have assigned coal should follow these guidelines while allocating the assigned coal among their own generating stations, other state generating stations, Central Government Stations and Independent Power Plants (IPPs- mostly private).

New policy on coal linkage to thermal power plants

Coal linkage policy is a central government designed guidelines for the allocation of coal among thermal power firms. Under the new coal linkage policy, a state’s coal requirement would be clubbed and assigned to the respective state or state-nominated agencies. The state would, then, award coal linkage according to applicant’s need, efficiency and cost of power to the power plants in its territory.

For the use of coal in state/ central generating plants, the deciding criteria shall be plant efficiency, coal transportation cost, transmission charges and the overall cost of power.

Private-owned independent power plants (IPPs) have to bid for the coal linkage. The basis of bidding would be the location of source of coal, quantity of coal, amount of power and delivery point of power they generate.

It is the concerned state with coal mines through its discretion that coal linkage would be awarded, on demand basis. At the same time, this mechanism should be transparent.

The new policy also allows coal swaps from inefficient plants to efficient plants. The swap also can be made between plants situated away from coal mines to minimise coal transportation costs and thereby cost of power.

India is having a coal using power generation capacity of 145,000 MW. The domestic availability for power purposes from domestic sources is 737 million tonnes (mt). Close to 30,000 Mw is still awaiting coal allocation.