Coal India Limited is planning to conduct auctions under government’s Shakti scheme for entering into long term coal supply contract with 12,000 MW of independent power producers that have long term power purchase agreements with state distribution companies but does not have coal supply contract.
SBI Caps which has been appointed as the transaction advisor for Shakti by Coal India, has advised that this category of independent power producer would be taken up first.
Independent power producers would have to submit their applications within 15 days following which the auction would be conducted by MSTC. The auction will be based on tariffs the power producers will charge from the distribution companies. The company that bids for the lowest tariff will be eligible for receiving coal.
1,000 MW of power capacity requires around 4.5 million tonnes of coal. Coal India may offer about 50 million tonnes of coal in the auction. The tenure of the coal supply contract would be equal to the tenure of the long term power purchase agreement. It is expected that the distribution companies will pass on the reduction in tariff to its consumers.