Power supply under SHAKTI: Govt mulls EMD-like mechanism for states

New Delhi: The government is considering bringing in a financial instrument, like Earnest Money Deposits (EMD), to ensure seriousness on the part of states who have reached out to the Central nodal agency, Power Finance Corporation (PFC), for power supply under the SHAKTI scheme. According to an official document reviewed by PSU Watch, a government committee has asked the Ministry of Power and the Central Electricity Authority (CEA) to suggest a suitable financial instrument to ensure seriousness on the part of states requesting power supplies, so that coal requirement for the said power demand can be earmarked.

According to the minutes of a recent meeting conducted by the Standing Linkage Committee (Long-Term) for Power Sector, the committee has agreed that "some EMD mechanism should be attached to earmarking of coal linkages under SHAKTI B (v). It was discussed that a mechanism may be worked out by the Ministry of Power/CEA to attach a suitable financial instrument so that seriousness is ensured with regard to the quantify requested for earmarking."

PFC to seek EMD-like financial instrument from states

Under the SHAKTI scheme, PFC has been made responsible for aggregating power demand from a group of states for medium term and then conducting bidding for supplies. PFC will be responsible for procuring power on the behalf of these states and for requesting coal linkage for power generation for meeting the said power demand. "However, this might also lead to companies sitting idle on coal procured from CIL for the purpose, and to prevent that, the committee has suggested the provision of EMD. Since the financial instrument did not find acceptance from everyone present at the meeting, it was decided that the CEA will come up with an alternative, some other financial instrument, that can be used to reflect seriousness on the part of bidders," said a government official in the know of the matter.

"To prevent squatting on national resource, a mechanism similar to those applicable to coal blocks should be adopted. It was discussed that in view of the experience of earlier earmarked quantity under SHAKTI B (v), a seriousness has to be attached at the stage of earmarking of coal itself and one such mechanism of attaching seriousness is financial instrument in the form of Earnest Money Deposits (EMDs)," said the document.

"It was discussed in the meeting that PFC takes EMD from bidders for PPA as per usual practice. Discoms are also commercial entities whose dernand has been aggregated by States, therefore should be subjected to EMD mechanism for earmarking of Coal/linkage," it added.

SHAKTI: Niti Aayog calls for grace period for power drawl

At the meeting, Niti Aayog agreed to the condition of attaching EMD to ensure seriousness in aggregating the power requirement, however, the body also called for a reasonable grace period for power drawl. It said that a grace period should be there for the nodal agency "as there may be instances of re-tendering for procurement of aggregated power or delay in entering PPA by the successful bidders with the discoms," said the minutes of the meeting.

Power Ministry launches scheme under which PFC will procure power for states

However, the final decision was that grace period will be only be considered on submission of a financial mechanism , like EMD. "It was discussed that any time extension/grace period will be considered on submission of mechanism of EMDs so that seriousness, genuineness and urgency is ensured with regard to the quantity requested for earmarking," the committee decided.

CIL will have to supply 27 MTPA coal for 4,500 MW power demand

According to the document, the CEA has calculated the normative coal requirement for 4,500 MW power demand as 26.93 MTPA at G-13 grade. Coal India Limited is believed to have told the committee that coal sources, along with the grades, range of grades, can be offered by it within l5 days.

Under the scheme, PFC Consulting Ltd has so far invited bids for the supply of 4,500 MW of power for a period of five years. The government launched the initiative under B (v) of the SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy. The power supply is to be undertaken on Finance, Own and Operate (FOO) basis. The supply of electricity will commence from April 2023.

The utilities that have evinced interest for the scheme are Gujarat Urja Vikas Nigam Ltd, Maharashtra State Electricity Distribution Company Ltd, Madhya Pradesh Power Management Company Ltd, New Delhi Municipal Corporation and Tamil Nadu Generation and Distribution Corporation Ltd. The last date for the bid submission is December 21, 2022.

It is for the first time that bidding is being carried out under B(v) of the Shakti scheme. Also, a revised PPA (power purchase agreement) for medium term is being used in this bidding. This scheme is expected to help states that are facing power shortage and also help generation plants to increase their capacities.

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