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Cabinet approves proposal for efficient usage of coal linkages

05 May, 2016

To ensure better coal utilisation by India’s power sector, the Union cabinet on Wednesday approved a plan to supply the fuel to electricity generation plants in an efficient manner.

Under the new arrangement, long-term coal linkages of power projects—central, state and private—will be clubbed and assigned at a group level for the entities to manage their fuel management. The so-called linkage assures a project of fuel supply.

Under the present arrangement, while an organisation has access to different fuel linkages, they are assigned for specific projects without the group entity being able to assign this important fuel source as per its preference for better project efficiency.

“The proposal envisages that all the long-term coal linkages of individual state generating stations shall be clubbed and assigned to respective states/state nominated agency. Similarly coal linkages of individual central generating stations (CGS) shall be clubbed and assigned to the company owning the CGS, to enable efficient coal utilization amongst end use generating stations,” the government said in a statement.

Coal has an important place in India’s energy mix. Of the country’s installed power generation capacity of 298,060 megawatt (MW), coal-fuelled capacity accounts for 62% or 185,173MW.

Central Electricity Authority, India’s apex power sector planning body, will draw up a methodology for implementing the plan.

The proposed move will not only reduce the cost of electricity but will also reduce emission and ease congestion on the country’s railway network. India has been trying to bolster its credentials as the global clean energy champion and has pledged to reduce emissions at the United Nations Climate Change Conference in Paris.

Experts welcomed the plan.

According to Debashish Mishra, partner, Deloitte Touche Tohmatsu India LLP, the decision will help in utilising 18-20 gigawatt of installed capacity which is currently stranded due to the absence of coal linkages.

The strategy is also in sync with central government’s Ujwal Discom Assurance Yojana which aims to allow swap of coal sources.

“The step will definitely bring down transportation costs as currently traversing the long distances for supplying coal entails more costs,” added Dipesh Dipu, partner at Jenissi Management Consultants, a consultancy focused on energy and resources.

There is tremendous pressure on the Indian Railways and with such kind of rationalisation of linkages, Indian railways will also get a breathing space going forward, he added.

In a separate decision, the Cabinet Committee on Economic Affairs approved four-laning of 128km Lucknow-Sultanpur section on the National Highway-56 in Uttar Pradesh at an estimated cost of Rs2,844.72 crore. In addition, two lanes will be added to the Shimla Bypass (Kaithlighat to Shimla section) on National Highway-22 in Himachal Pradesh with an estimated project cost of around Rs1,583.18 crore. 

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Cabinet approves proposal for efficient usage of coal linkages

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