Under the proposal, states will have the freedom to select companies that offer the lowest power tariff based on the coal from these blocks - similar to the model adopted by the Centre to allot ultra mega power projects (UMPPs), where coal blocks come bundled with the projects. However, unlike in the case of UMPPs, the companies don´t have to compulsorily build new plants and can use the coal from the mines to run units that are idling for want of fuel. The same model will be followed to award coal supplies from Coal India as well.
A senior government official said this would help state distribution companies procure cheaper power and power producers get coal with an assurance of power purchase. Reverse-auction of coal to power companies may be scrapped "This proposal kills two birds with one stone," he said. "It solves the problems of fuel supply and lack of power purchase agreements in one go. This proposal is cleaner than the reverse e-auction."