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Expected Reading Comprehension Set for IBPS PO - Part 2

Published on Monday, October 17, 2016
Directions (1-5): Read the passage carefully and answer the questions given below it.
The government has made two crucial clarifications on the e-auction process for captive coal blocks in order to make them more attractive to potential bidders. According to the changes introduced by
the coal ministry, existing or upcoming power plants that don't have power purchase agreements (PPAs) with buyers of electricity will also be eligible to bid for the coal blocks. Also, the reserve price of? 100/tonne payable by the successful bidder will be included in the energy charge, which means that fuel cost that will be passed through to consumers will include reserve price along with the actual rate of coal at which the bid has been won. This could translate into bidders being willing to bid more aggressively and still manage to run a profitable business. The minutes of meeting released by the ministry said "power projects which do not have PPAs today but would be entering into PPAs (Case I bidding) in future also need to be covered explicitly." "Generators without PPAs have been in dilemma for some time. This was because states are unlikely to enter into PPAs with generators that do not have coal linkage and Coal India would refuse to give linkage to generators without PPAs. We have tried to correct the situation by allowing such generators to enter into the auction fray. Apart from the scarcity of coal that has led to more than 15,000 MW of generation capacity not being able to sign coal linkage pact with Coal India, the situation has been exacerbated by the loss making state owned distribution companies not shying away from signing pacts with power producers for long-term supply of power because of financial health. While there will not be any deadline in place for such capacity to enter into PPA's they will not be allowed to sell more than 15% of its capacity in the open market. These bidders will also have to pay an additional reserve price for the quantum of coal used for power sold in the merchant market, over and above the reserve price for other generators with long-term PPAs which is ? 100/ tonne. The clarification significantly invigorates the auction as there's considerable generation capacity without fully covered fuel supply, and generators can create an additional profit margin between the escalation offered in Case I bidding documents and the actual cost inflation. As regards the reserve price (which is to be paid to the state government) being a pass through. For merchant power, the reserve price is higher; the new proposal will make sure that there are no extraordinary gains from open market sales. This is a safety feature as bidders would factor in the extra reserve price in their quoted prices."

1. In the given passage for whom the reserve price is considered to be higher?
1 ) For government
2) For coal mine owners
3) For merchants
4) For buyers and sellers
5) For policý makers

2. According to the passage generators can create which type of margin?
(A) Negotiated loss margin
(B) Additional profit margin
(C) Substantial balancing margin

1) only (A)
2) only (B)
3) only (C) 
4) only (B) and (C)
5) All (B) and (C)

3. Which of the following has been considered eligible to bid for the coal blocks after the changes introduced by the ministry? 
1) The upcoming power plants that have PPAs with buyers of electricity. 
2) The existing power plants that do have power purchase agreements.
3) The upcoming power plants that have PPAs with sellers ofelectricity.
4) The existing or upcoming power plants that don't have PPAs.
5) None of these

4. What step(s) would translate into bidder being willing to bid more aggressively?
(A) The reserve price of ? 100/ tonne payable by the successful bidder to be included in the energy charge.
(B) The fuel cost passed to consumers will include reserve price and the actual rate of coal.
(C) The actual rate of coal will negotiate with profit maximisation.

1) only 
2) only (C)
3) only (A) and (C)
4) only (B) and (C)
5) only (A) and (B)

5. What led to more than fifteen thousand M W of generation capacity inability to sign coal linkage pact with Coal India? 
1 ) Lack of workers 
2) Lack of mines
3) Lack of buyers
4) Lack of trade
5) Lack of coal


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