On 2nd June 2022, the Central Electricity Regulatory Commission (CERC) issued a staff paper introducing a 'Blending of imported coal with domestic coal to mitigate the domestic coal shortage'. in response to MoP’s directive to the CERC, under section 107 of the Electricity Act, 2003 to amend sub regulation 3 of regulation 43 of CERC (Terms and Conditions of Tariff) Regulations, 2019) to facilitate higher blending of imported coal without prior consultation with beneficiaries up to 31st March 2023.

Toward ensuring prudent expenses, transparent and accountable fuel procurement process, and protecting consumer interests, Prayas (Energy Group) recommended that amendments to enable higher blending of imported coal without beneficiary consent or to allow increase in energy charge rate without beneficiary consent beyond the limits in the current regulations need not be introduced to CERC 2019 Tariff Regulations. 

This recommendation was based on there being insufficient grounds to bring in such a provision, as elaborated below: 

  • the shortages, which had spiked in April 2022, have already started normalising and are not likely to persist through the year
  • the extent of shortages varies extensively across states and seasons, and different states may find it optimal to deal with the shortage differently, calling to question the need for a blanket provision of blending imported coal 
  • the availability of domestic coal alone is not a major reason for shortage, and hence, procurement of more expensive imported coal is not likely to address low coal stocks due to other issues such as evacuation or payment challenges

Further, this provision will impact consumer tariffs and beneficiary costs and flexibility, and thus, it is crucial that power procurement and any changes to the agreed upon conditions therein, remain contingent on beneficiary consultation.