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APR 24 2013

CCEA to consider price pooling of coal again after two weeks

  • Economic Times, ET Bureau / Hyderabad
  • Created: Wed 24th APR 2013

Power producers facing acute fuel scarcity can still hope for coal at an average price of imports and cheaper domestic supplies as the Cabinet Committee on Economic Affairs (CCEA) will again consider price pooling after deferring the decision on Monday, top officials said.

Power minister Jyotiraditya Scindia, coal secretary SK Srivastava and Coal India chairman Narsing Rao told ET that the government was considering several options, although some sources said the matter may linger as the issues were complicated and various stakeholders had diverging demands and expectations from price pooling of coal.

"While considering various options to meet the coal demand of power producers the CCEA has sought some more information regarding the status of the implementation of power projects under construction and an assessment of their power supply obligations to work out an optimum methodology for meeting the fuel supply requirement of the upcoming projects.

The CCEA wishes to consider possible alternatives to deal with competing demand for coal in the wake of the limited availability as per coal production forecast of the ministry of coal," Scindia told ET.

The coal secretary also said that price pooling of coal, with some changes to the original proposal, was under consideration by a committee. "Although there has been no final decision on price pooling at the Monday's meeting, two new proposals have been mooted at the CCEA meeting held on April 22. The committee will work on the proposals and comeback to CCEA in two weeks," Srivastava told ET.

Coal India too is expecting government to take a serious look at the issue. Coal India chairman, S NarsingRao said: "The final order for price pooling is expected to come either in the form of a Presidential directive or a new clause in the National Coal Distribution Policy. We will have to make necessary changes accordingly," he told ET.

Power producers are eagerly awaiting the decision as thousands of megawatts of new thermal capacity is idling or underutilised because Coal India's output has lagged demand. On Tuesday, Association of Power Producers that held meeting to appoint its new chairman and vice chairman also assessed the status of coal price pooling.

A member of the advisory committee appointed by power minister JyotiradityaScindia said the government is trying to find an optimum solution as some of the state utilities and governments are against the idea. "It is a complicated matter and there is no concrete scenario emerging for the decision makers who were evaluating four different options for the new coal price regime.

They are also keeping in mind the political aspects especially when half a dozen states are going for election this year." He added that the coal pool pricing may take longer than expected.

According to sources, the price pooling mechanism will now try and include companies that do not have any sort of coal supply commitments from any sources. Some 16,000 mw of capacities do not have such supply contracts. Nevertheless, price pooling will be for units that have been put up after April 2009. The model that was being considered included blending prices of imported coal and domestic coal to arrive at a uniform increased price which will be paid by all power producers.

The model that was mooted earlier included requiring power generators to pay a single price which will have the cost of imported coal factored into it.

Hence power producers will be paying one price for contracted volume which will be mix of domestic and imported coal. It is, however, unclear at this stage, how CIL will account for the various categories of domestic coal that its various mines produce.

Nevertheless, a number of state distribution companies including West Bengal are against price pooling as they believe it will raise cost of power for consumers. The MamataBannerjee government in West Bengal and private power utilities in the Bengal believes that coal price pooling is a ploy to help a handful of new independent power producers which saw their entire calculations goes wrong after they built power plants based primarily on imported coal.


West Bengal Coal Coal India Limited Central Electricity Authority Cabinet Committee on Economic Affairs CIL Power India

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