Seamless Transfers

New coal linkage policy aims to improve generation efficiency

The Ministry of Coal (MoC) recently finalised the guidelines for the automatic coal linkage transfer policy to enable the seamless transfer of fuel from old thermal power plants (TPPs) that have been scrapped to new supercritical plants. The policy allows the automatic transfer of coal linkages from ageing plants (over 25 years old) to new plants of the closest supercritical capacity to enhance their generation capacity by up to 50 per cent, ensure lower emissions, and optimise land as well as water use.

The linkage transfer policy holds great significance given that a substantial number of thermal generation assets in the country have been underperforming. According to the Central Electricity Authority, TPPs aggregating nearly 36,000 MW are more than 25 years old and need to be replaced in a phased manner.

The government first allowed coal linkage transfers in April 2015 from the Panipat thermal power station (TPS) of Haryana Power Generation Corporation Limited to the new supercritical plant proposed to be set up at the same location. The inefficient and uneconomical 110 MW Units I to IV of the Panipat TPS will be replaced by one 800 MW supercritical unit on the same premises through the simultaneous phasing out of the inefficient units over the next four to five years.

New guidelines

The MoC’s Standing Linkage Committee (Long Term) drafted new guidelines for automatic coal linkage transfers in response to the issues highlighted by the Ministry of Power (MoP) in the existing policy. The ministry had underlined that new plants would come up in a staggered way by the end of the Thirteenth Plan period. However, this might be carried forward to the Fourteenth Plan period.

As per the new guidelines, older coal-based thermal generation units that have completed their useful life should be replaced in a phased manner. In case the new plant is of higher capacity than the old one, the government will prioritise the allocation of additional coal to the new plant, subject to availability. The policy is applicable only to public sector plants that have already been granted letters of assurance (LoAs)/linkages and been set up prior to the notification of the National Coal Distribution Policy, 2007. The transfer of LoAs is permissible only for supercritical plants being set up in the same state as the old plant.

Impact

This is part of the government’s overall efforts to improve the fuel supply scenario for the thermal generation segment through various legislative and policy moves. In March 2015, the government enacted the Coal Mines (Special Provisions) Act, 2015, which enabled the reallocation of captive coal mines through competitive bidding. With the enactment of the new law, the government also approved the sale of coal by private mining companies in the open market, thereby boosting commercial mining operations. In addition, the MoC has taken steps for coal linkage rationalisation for TPPs as well as the swapping of imported coal supply with linkage coal to save on transportation costs. Going forward, the ministry proposes to award long-term coal linkages to power projects after competitive bidding.

The automatic coal linkage transfer policy supports the MoP’s plans to shift entirely to supercritical coal-based generation technology by 2022. This will improve production efficiency as supercritical plants operate at high temperatures and pressures, resulting in much higher heat efficiencies compared to subcritical plants. Supercritical technology reduces fuel costs as well as greenhouse gas emissions due to improved plant efficiency.

The policy will encourage utilities to replace old power plants. At present, most utilities in India opt for renovation and retrofitting to increase the lifespan of old units rather than the complete replacement of existing plants due to the lack of fuel linkage clarity. This has discouraged utilities from optimising their production and environmental efficiency gains. Automatic linkage transfers will encourage generation companies to opt for replacement.

Therefore, this policy is expected to play an key role in resolving fuel supply issues in the thermal power segment. It will also provide a fillip to overall power generation using supercritical technology.

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