The improvement of coal supply in recent days, with the demand for energy declining with cooler temperatures, has helped avert a situation of serious shortage of electricity supply.The improvement of coal supplies in recent days, with the demand for energy falling as temperatures fall, have helped avert a serious shortage of electricity supply.

Independent Power Producers (IPPs) have asked the government to put in place a “fair penalty mechanism” for all stakeholders – i.e. power plants, coal companies and railways – to ensure that the risks of coal supply are evenly balanced among all parties. Currently, IPPs have to make full coal payments up front, while there is no penalty for coal companies, including Coal India (CIL) and railways, if the desired quantity and quality of coal does not reach private generators on time.

However, Gencos owned by the central and state governments are not obligated to make payments to coal suppliers in advance. In the lead-up to the current coal crisis, many states were receiving less coal supplies due to their CIL dues. The government recently said that Maharashtra, Rajasthan, Tamil Nadu, Uttar Pradesh and Madhya Pradesh have longstanding issues of exorbitant dues to coal companies.

The sources said that a delegation from the Association of Power Producers (APP) recently met with Federal Energy Minister RK Singh, with industry members requesting the minister to submit a ‘three-way fuel supply agreement’ to be signed between generators, coal companies and railways. “This will ensure a clear definition of coal supply responsibilities for private power plants, and ensure a balanced distribution of risks,” a senior APP official told FE. Singh is said to have asked the APP to send a note so that the union’s Department of Energy could write to states and other stakeholders on the issue.

The improvement of coal supply in recent days, with the demand for energy declining with cooler temperatures, has helped avert a situation of serious shortage of electricity supply. However, analysts feel that above-average energy demand and over-reliance on coal-based power plants will make it difficult for power plants to maintain comfortable levels of fuel stock in the near future. Temperatures are starting to rise from March to May, “so the build-up of coal stocks before the end of February is critical,” analysts at Crisil Research said recently.

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