Coal News We love to talk!

MAY 09 2013

Regulating coal

  • Economic Times, ET Bureau / Hyderabad
  • Created: Thu 09th MAY 2013

Will be next to impossible with a monopoly supplier

The Group of Ministers (GoM) decision to not give the coal regulator pricing powers, needless to say, comes as a big disappointment and it is to be hoped that there will be a rethink when the matter goes to the Cabinet. One of the principal things a regulator does, in situations of natural monopolies, is to ensure customers dont get taken for a ridethe clash between Coal India Limited and NTPC over dues of R2,800 crore was precisely on account of the latter alleging the monopoly producer of coal was selling it poor quality coal. Whether you look at the telecom regulator or the electricity regulators, their success or lack of it has very largely been determined by their powers to regulate pricing as well as to set norms for pricingin the case of the Central Electricity Regulatory Commission (CERC), power tariffs collapsed when it laid down a rule that said incentives for producing extra power would not kick in at 68.5% PLF levels but at 80-85% PLF levels. The proposal right now is to give the coal regulator some powers on the methodology to fix tariffs, so it is to be hoped the regulator makes something of this power.

The greatest power a regulator has, though, is the ability to increase competition. In the case of telecom, it was the introduction of a large number of players that brought down tariffs to todays rock-bottom levels, not just the regulator looking at telecom costs while fixing tariffs or implementing some existing-tariff-minus-5% type of formula in a mechanical manner each year. And since electricity regulators never implemented the Electricity Act 2003 in its true spirit, there has never been any competition to monopoly suppliersthat is one of the main reasons for why electricity tariffs have risen while telecom tariffs have fallen. Power production costs, it is true, have gone up with fuel costs rising, but had there been more competition, distribution companies would have worked that much harder to reduce AT&C losses. And that would have brought down tariffs significantlya 50% AT&C loss, for instance, means tariffs have to be doubled, while a 40% AT&C loss level means tariffs have to be raised by a lower 66%. In the case of the coal sector, even if the GoM had given the regulator the power to fix prices, the only way the sector can become more efficient, or for tariffs to fall, is to bring in more producers. Doing this, however, is something the regulator cannot do unless the Coal Nationalisation Act is scrapped. This is something the GoM needs to ponder over.

Tags

Carbon Emission Reduction Central Electricity Regulatory Commission Coal Coal India Limited Electricity Act NTPC Ltd Electricity Regulatory Commission Prospecting Licence Power Electricity India

Related News

  • Maharashtra seeks coal, gas to avoid generation loss  Read more
  • Kudankulam atomic plant: Experts hail SC order  Read more
  • India's energy deficit down to 1% in four years: NITI Aayog  Read more
  • Moily on tour, India shows interest in building oil refineries in Iraq  Read more
  • Transocean says RIL ending drillship contract  Read more
  • How to accomplish Indias energy goals and drive the economy further; all you need to know  Read more
  • Govt to gain $2.2 billion from gas price hike: Merrill Lynch  Read more
  • Coal India mines SPVs for 1-bn-tonne mark  Read more
  • PXIL alleges discrimination in transmission corridor allocation  Read more
  • Plans afoot to increase coal handling at Mormugao Port Trust: NGO  Read more