Montek for increasing coal prices

Speaking at the KPMG Energy Conclave here, Singh said energy in India is under-priced, which has led to distortions in market.

PTI| Updated: Nov 20, 2013, 23:20 PM IST

New Delhi: Planning Commission Deputy Chairman Montek Singh Ahluwalia Wednesday advocated hiking price of coal to prevent distortions in domestic energy market.

Speaking at the KPMG Energy Conclave here, Singh said energy in India is under-priced, which has led to distortions in market.

"Indian coal is priced much below imported coal. Even after price is adjusted in terms of calorific value, it is low. We should try to align the domestic coal price to international. Even if you do not do that, the coal prices would certainly go up... And that is an important issue that we have to face," he said.

Stating that prices cannot be hiked overnight and have to be gradually raised, he said the recent decision to pass on cost of costlier imported coal to consumers was an absolutely unavoidable move.

"Because of the cheaper domestic supply, the demand is more and it is distorting the market. We solve that problem by ultimately pooling of coal," he said.

"Energy in India is seriously under-priced. We need to make people understand that a trajectory of rapid growth is needed in energy pricing. This correction has to be done over a period of time, not immediately," he said.

Under-pricing of energy discouraged increasing supply, he said adding Indian coal was priced much below that of imported coal.

Speaking on the occasion, Oil Minister M Veerappa Moily said the energy demands are bound to increase as the economy grows.

"While world energy demand is projected to grow at a rate of 1-2 percent per annum in the next 20-30 years, India's energy demand is poised to grow between 6.5-8 percent annually by 2030," he said.

Globally, the fuel mix is gradually shifting away from oil and coal to gas and renewables as the energy supply mix diversifies.

"The fuel mix is projected to change relatively slowly, due to long asset lifetimes, but gas and non-fossil fuels are likely to gain share at the expense of coal and oil. Among fossil fuels, natural gas is likely to grow the fastest," he said.

Indian energy sector, he said, is going through a critical phase and was facing several challenges.

"The industry and the nation at large would need to make choices to address key issues like volatile prices, global linkage of raw material prices, alternate energy developments, and importance of efficiency across the value chain and so on. Also, globalisation has meant that our energy markets are more and more linked to global markets," he added.