In a stern communication to the Coal ministry, the Power Ministry has stipulated that all entities that have been allocated coal blocks by the government should sell power through competitive bidding. Entities failing to do so, will face action that can lead to the cancellation of their licenses. The order holds true even for all those who have already been allotted coal blocks for power sector IPPs (Independent Power Producers).
As per tariff policy, all distribution companies (DISCOMS) are required to sign Power Purchase Agreements (PPAs) through competitive bidding and the coal block allocatees are also expected to participate in the same.
However, it was observed that a number of entities were not passing the benefits of low-cost coal to the end users, as they were fixing the sale price of power without any competitive bidding.
The communication comes close on the heels of a draft CAG report that is said to have estimated a loss of Rs 10.76 lakh crore to government due to allotment of about 155 coal blocks without auction to private and public sector companies during 2004-2009. The power sector is said to be facing heat of an acute coal shortage and high international coal prices for many months now.
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