Gujarat first state to implement flexible coal utilization scheme

Ahmedabad/Rajkot: GMR Chhattisgarh Energy Ltd, a GMR group company, has won the bid to supply 500MW electricity to state-run Gujarat Urja Vikas Nigam Ltd (GUVNL) under the central government approved scheme, which allows flexibility in utilization of domestic coal for reducing the cost of power generation. Under the agreement, GMR will supply electricity to GUVNL at Rs 2.81 per unit.

With this move, Gujarat becomes the first state to implement the flexible coal utilization initiative whereby coal allocated to Gujarat State Electricity Corporation Ltd (GSECL), a subsidiary of GUVNL, will be made available to the GMR group company in Chhattisgarh, which in return will use the coal to generate power and supply it to GUVNL at the agreed tariff.

GSECL has coal allocation from Korba and Korea Rewa coal fields in Chhattisgarh. According to sources in the know, GMR will use GSECL coal to generate electricity from its power plant in Chhattisgarh and supply the power to GUVNL. This will save the cost of transporting coal from mines in Chhattisgarh to Gujarat making power generation cheaper.

Confirming the development, S B Khaliya, director finance, GUVNL said, "According to our rough estimate, we will be able to save 25 paisa per unit if power demand remains normal. However, the benefit will be even greater if demand rises. We expect demand to peak in coming days."

In August this year, GUVNL had floated a tender for procurement of 1,000MW electricity from operating power generating stations under flexible utilization of coal scheme and had set the benchmark tariff at Rs 2.82 per unit.

However, GMR Chhattisgarh Energy showed interest in supplying only 500MW and the company was selected as it was the only firm to have participated in the bidding process. GUVNL has filed an application with Gujarat Electricity Regulatory Commission (GERC) seeking the regulator's approval. "The contract will be awarded to the company after GERC gives its approval," said sources privy to the development.

The Union cabinet in May 2016 had approved the proposal of ministry of power for allowing flexibility in utilization of domestic coal among power generating stations to reduce the cost of power generation. The objective of the scheme is to allow flexibility in optimal use of domestic coal in efficient power generation resulting in reduction in cost of electricity generation and reduce the power purchase cost of state distribution companies.