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'CIL against price pooling of domestic and imported coal'

Last Updated: Wednesday, February 6, 2013 - 22:27

New Delhi: Coal India feels price pooling of domestic and imported coal would result in an extra burden on state power utilities which already owe over Rs 5,000 crore to the PSU, an official said.

"Coal India Ltd (CIL) has opposed price pooling of domestic and imported coal stating that states would oppose any such decision as this would result in extra burden on their plants, which were so far getting domestic coal on notified prices," the official said.

Power utilities including state-run units in West Bengal, Tamil Nadu, Jharkhand and Madhya Pradesh owe over Rs 5,000 crore to CIL, the official said, adding that the Coal Ministry has mentioned the same in its 144-page note on price pooling to Cabinet.

Of the Rs 5,000 crore, NTPC, which is yet to sign the fuel supply pact with CIL, has to pay more than Rs 1,000 crore to the coal PSU, he added.

"Independent directors of the PSU are also opposed to any such price pooling mechanism, which according to them might impact the financials of the coal major," a source said.

The PSU's independent directors had earlier opposed the government decision that Coal India should commit 80 percent of assured supply to power producers.

Later, the government in April last year had issued a presidential directive asking the coal major supply 80 percent of committed quantity.

Sources said, in case a decision on price pooling is arrived at, the government might resort to issuing a Presidential Directive for the same.

The Cabinet Committee on Economic Affairs yesterday had deliberated on averaging of prices of domestic and imported coal to get a uniform feedstock price in the country and had asked coal and power ministries to come back with specifics of the proposal.

"The decision in principle has been taken... Structure of decision has been put in place ... Coal and Power Ministries will come back with the specifics," Minister of State for Information and Broadcasting Manish Tewari had told reporters yesterday when asked whether CCEA had approved price pooling.

Prime Minister's Office had directed CIL and Central Electricity Authority (CEA) last year to work on price pooling so as to ensure 80 percent supplies to power plants.

However, the final decision on the issue is pending for long due to differences between the Coal and Power Ministries on how the impact of higher imported coal prices will be shared between CIL and power companies.

Sources said, Coal Ministry, yesterday had proposed import of coal on cost plus basis and its pass through.

In the alternative, it had also proposed that "price pooling should be done for the power plants commissioned both before and after March 31, 2009 or price pooling should be done for only plants which are commissioned or are likely to be commissioned after March 31, 2009."

As per an official, if price pooling is done for the power plants commissioned before or after March 31, 2009, this would result in an increase in the cost of power generation up to 15 paise per unit. For the other option, the increase might be up to 40 paise per unit, he added.

Earlier, the Power Ministry had suggested to the Coal Ministry that the difference in cost of imported and domestic coal should be added to the cost of indigenous fuel at the time of finalising proposal for pooling coal prices.

CIL, on its part, had said that price pooling is a mechanism to implement fuel supply agreement (FSA) that it has to sign with power companies.

If price pooling is approved, then 15 percent supply of imported coal "will be not in the cost plus method, but in pooling mechanism", it had said.

The CIL board had earlier approved the modified FSA without price pooling, for assured supply of 65 percent through domestic sources and 15 percent from imports at cost plus basis.

Many state governments, however, have voiced their opposition to the price pooling issue as they fear that this could lead to increase in electricity tariffs.


First Published: Wednesday, February 6, 2013 - 22:27
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