In the wake of increased power demand, the central government has taken the central and the state-owned power producers under its patronage and directed Coal India to offer them coal supplies. This is not in line with the present system of auctioning of coal linkages.
Why is this important
Auctioning of coal supply linkages has been the norm till now and the independent power producers (IPP) are crying foul over the return of government control over coal supplies. Wherever coal availability and suitable transportation are in place, coal allotment is supposed to be made to the PSU gencos.
Association of Power Producers (APP) is of the opinion that this is discriminatory in nature and priority beyond the contract should be linked with efficiency in order to produce more power using the same quantity of coal. While Coal India has failed to meet its production targets, this step, in turn, can put pressure on the current IPPs.
Stocks to be impacted
This impacts all the independent power producers negatively while state producers like NTPC (CMP: Rs 167, Market Capitalisation: Rs. 1,37,987 crores, FY2020 EV/EBITDA: 8.4) will be benefitted from this.