Lok Sabha Question No. 1695 (UNSTARRED), answered on 2018-12-20
Subject: Reforms in Power Sector
Ministry: POWER
Asked by: RAMSINH PATALYABHAI RATHWA

## GOVERNMENT OF INDIA

## MINISTRY OF POWER

## LOK SABHA UNSTARRED QUESTION NO.1695 TO BE ANSWERED ON 20.12.2018

## REFORMS IN POWER SECTOR

1695. SHRI RAMSINH RATHWA:

Will the Minister of POWER be pleased to state:

- (a) whether  the  Government  has  set  up  any  advisory  committee  to discuss the issues relating to power sector and to suggest reforms;
- (b) if so, the details thereof;
- (c) whether  this  initiative  would  solve  the  problems  of  the  sector including  the  problem  of  fuel  shortage  threatening  the  viability  of  the sector; and
- (d) if so, the details thereof?

## A N S W E R

THE MINISTER OF STATE (INDEPENDENT CHARGE) FOR POWER AND NEW & RENEWABLE ENERGY

( SHRI  R. K. SINGH )

(a) to (d) :    There  is  no  advisory  committee  set  up  to  discuss  issues relating  to  power  sector  or  to  suggest  reforms.  However,  a  High  Level Empowered  Committee  (HLEC)  was  constituted  by  the  Government  on 29.07.2018  to  address  the  issues  of  Stressed  Thermal  Power  Projects, headed  by  Cabinet  Secretary  with  representatives  from Ministry of Railways, Ministry of Finance, Ministry of Power, Ministry of Coal and the lenders having major exposure to the power sector. The HLEC has made following recommendations in their report:

1.   Recommendations for Coal allocation/supply

1.1.              Coal  Linkage  for  short-term  PPA: Linkage  coal  may  be allowed  to  be  used  against  short  term  PPAs  and  power  be  sold through Discovery of Efficient Energy Price (DEEP) portal following a transparent bidding process.

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1.2.              Coal  Supply  in  case  of  termination  of  PPAs  due  to Payment  default by DISCOMs: A  generator  should  be  able to terminate PPA in case of default in payment from the DISCOM with the facility to use linkage coal for short term PPAs for a period of maximum of 2 years or until they find another buyer of power under long/medium term PPA, whichever is earlier.

1.3.              Procurement  of  bulk  power by a nodal agency against pre-declared  linkages: A  nodal  agency  may  be  designated  which may invite bids for procurement of bulk power for medium term for 3 to 5 years in appropriate tranches, against pre declared linkage by Coal India Limited (CIL).

1.4.              PSU to act as an aggregator of power: NTPC can act as an  aggregator  of  power,  i.e.,  procure  power  through  transparent competitive bidding process from such stressed power plants and offer  that  power  to  the  DISCOMs  against  PPAs  of  NTPC  till  such time as NTPC's own concerned plants/units are commissioned.

1.5.              Increase  in  quantity  of  coal  for  special  forward  eauction for power sector: Ministry Of Coal may earmark for power, at  least  60  per  cent  of  the  e-auction  coal,  and  this  should  be  in addition to the regular coal requirement of the power sector.

1.6.              Linkage to be provided at notified prices without bidding:The generator should be required to bid only once, for the procurement of PPA and linkage should be granted at notified price without  any  further  bidding,  to  the  extent  of  incremental  coal production.

1.7.              Non-lapsing  of  short  supplies  of  coal: If  there  is  a shortfall in the supply of coal and it is attributable to the Ministry of Coal or Railways; such shortfall need not lapse and be carried over to the subsequent months up to a maximum of three months.

1.8.              ACQ to be determined based on efficiency: Upper ceiling for the ACQ/MW may be prescribed by the CEA on the basis of efficiency parameters and irrespective of the capacity and actual consumption of that plant, the coal may be supplied on that basis.

2.   Recommendations to facilitate sale of power of the stressed power plants

2.1.              Retirement  of  old  and  inefficient  Plants: Old  and  high heat rate plants not complying with new environment norms may be considered for retirement in a phased and time bound manner at the same time avoiding any demand/supply mismatch.

........3.

3.   Recommendations on Regulatory & DISCOM payment issues:
2. 3.1.              Mandatory payment of Late Payment Surcharge (LPS):Late Payment Surcharge be mandatorily paid in the event of delay in payment by the DISCOM.
3. 3.2.              Payment  Security  mechanism  for  IPPs: PFIs  providing the Bill Discounting facility may also be covered by TPA i.e. in case of  default  by the DISCOM, the RBI may recover the dues from the account of States and make payment to the PFIs.
4.   Other Recommendations
5. 4.1.              Cancellation of PPA/FSA/LTOA post NCLT scenario: PPAs,  FSA  and  LTOA  for  transmission  of  power,  EC/FC clearances, and all other approvals including water, be kept alive and not cancelled by the respective agencies even if the project is referred to NCLT or is acquired by any other entity. All of these may be linked to the plant and not the Promoter.
6. 4.2.              Cancellation of PPA for non-compliance of COD: In case there  is  a  delay  in  the  commissioning  of  a  project,  the  DISCOMs may be advised not to cancel the PPAs signed with the Generator and the same be kept on hold for a certain period of time.
7. 4.3.              Low utilization of Gas plant capacity due to paucity of natural gas: In order to revive gas based power plants, Ministry of Power and Ministry of Petroleum & Natural Gas may jointly devise a scheme in line with the earlier e-bid RLNG Scheme (supported by PSDF).

Report has been circulated by the Government to all members. It has also been published on the website of the Ministry.

- It is believed that with the implementation of the recommendations  outlined  in  the  report,  issues  affecting  many  of  the stressed  thermal  power  projects  are  likely  to  get  resolved  and  the investments made can be put to productive use.

Govt. of India has taken following steps so far to resolve the issues related to stress in Thermal Power Projects:

- I. Fuel Linkages under SHAKTI; The government has approved a new coal  linkage  allocation  policy  on  May  17,  2018  named  SHAKTI (Scheme  for  harnessing  &  allocating  koyla  transparently  in  India). Under  the  scheme,  auction    of    coal    linkages    for    Independent Power  Producers  (IPPs) with

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- II. PPAs based on domestic coal has been conducted on September 12, 2017. IPPs having PPA but no coal linkages have participated in the auction and linkages have been granted to 11549 MW capacity (10 projects) including five stressed projects of total 8490 MW capacity, and  these  projects  have  been  resolved.  Under  B(i)  provision  of SHAKTI  scheme,  linkages  have  been  granted  to  States/  Central Gencos for 8870 MW for 10 projects.
- III. Pilot  project  for  procurement  of  2500  MW;  In  order  to  address  the problem  of  lack  of  Power  Purchase  Agreements  (PPAs)  in  the country, the Ministry of Power has notified a scheme for procurement of 2500 MW on competitive basis for a period of 3 years from  the  generators  with  commissioned  projects  having  untied capacity.  Under  the  scheme,  PFC  Consulting  Ltd.  invited  bids  for 2500 MW  of power  wherein PTC  India Limited acted as an aggregator  of  demand  for  purchase  of  power  from  the  power projects  and  sell  that  power  to  states  utilities.  Bids  have  been received from 7 (seven) projects for aggregate power of 1900 MW. Letter of Award (LOA) has been issued to all the successful bidders (1900 MW).
- IV. DISCOM  Payment  Monitoring  App  PRAAPTI: A  new  App  PRAAPTI (Payment  Ratification and Analysis in Power  Procurement  for Bringing Transparency in Invoicing of generators) has been launched by the Ministry of Power to bring more transparency in the payment system by DISCOMs. The generators are being actively encouraged to feed in their invoicing and payments data in the portal.
- V. Steps  taken  to  reduce  the  cost  of  generation: Reduction  in  the generation  cost  is  likely  to  improve  the  ability  of  DISCOMs  to purchase  more  power  and  thus  create  more  demand  for  power generators. The government has taken various steps to reduce the cost of generation, which are as under:-
- a. The introduction of third party sampling by Central Institute of Mining and Fuel Research (CIMFR): The  Government  has started  third  party  sampling  of  coal  at  both  loading  and unloading end of coal supply from CIL to Generators.
6. b.
7. Coal linkage rationalization:
8.  Ministry  of  Power  vide  letter  no  5/3/2015-OM  dated  10th  June, 2016 issued  the  policy  on  flexibility  in  utilization  of  domestic  coal for  reducing  the  cost  of  power  generation  for  central  generating companies and state power utility.
9.  MoP vide letter  no 5/3/2015-OM  dated  20th   February,  2017  issued the  methodology  for  use  of  coal  by  state  in  private  generating stations.

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