To cut tariff, government wants to link coal bids to lower charges in PPAs

In a move aimed at lowering consumer electricity tariffs, the government has proposed to bid coal from state-run Coal India to those power generators that agree to cut the supply charges quoted in their power purchase agreements (PPAs).

PPAs are legal documents signed between power producers and power distribution companies.

“The power ministry is consulting electricity regulators whether the proposal to open PPAs is within the purview of the Electricity Act.”a senior government official said.

About 10,000 MW of power plants have signed PPAs but do not have coal supplies.

Earlier, the government was considering to auction coal to power companies that agree to pay the highest. “The new proposal is in tune with the government’s aim to pass on benefits to consumers and lower electricity tariffs,” another government official said.

The policy also proposes that all future coal tie-ups by CIL will be allotted to state distribution companies that in turn will call tariff-based competitive bids from companies on the lines of ultra mega power projects.

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