New Delhi: A quick resolution is necessary on the issue of price pooling for domestic and imported fuel for power plants that are facing shortages of coal and gas supply, Planning Commission Deputy Chairman Montek Singh Ahluwalia said Wednesday.
"In the next 3-4 years I do not see any way of resolving these issues unless high level decisions are taken, and both coal and gas (domestic and imported) prices have to be pooled," Ahluwalia said at the India Energy Forum here.
Under the pooling mechanism, the cheaper domestic coal as well as gas prices is averaged out with expensive imported fuel to get a reasonable rate for the feed stock for power plants.
Ahluwalia said there is a need to put in place serious investment plan for the power sector.
"We have to appreciate that the generation (of power) is increasingly led by the private sector. This investment has to be financed," he said.
However, financing by banks in either generation or transmission needs to have viability of the operation on the basis of the quality of the entrepreneur on project management skills.
"This would not have been a problem if the banks had a very strong position in terms of their own balance sheet," Ahluwalia said.
"There is a downturn, the NPAs (non-performing assets) are on the rise, the capital adequacy of the banks are under stress and this is happening at a time when globally there is huge pressure on banks," he added.
He said there is a need to recognise the problems of the power sector and that is why the Cabinet in September approved the restructuring plan for the sector.
The government had approved restructuring of Rs 1.9 lakh crore debt of State Electricity Boards in order to bailout the near-bankrupt power distribution companies.
Ahluwalia said the Electricity Regulation Act is not properly implemented and large consumers of power should be encouraged to enter into purchase agreements.
"Our interpretation of the Electricity Regulation Act is that if you are saying that open access is mandatory for all consumers above one megawatt, then there should be no tariff regulation on supply to such consumers.
"Such consumers should be encouraged to enter into purchase agreement...On a negotiated basis," he said.
The board of Coal India Ltd (CIL) had earlier approved the modified Fuel Supply Agreement (FSA) without price-pooling to provide 65 percent domestic coal and 15 percent imported coal at cost plus basis to power companies.
So far, only 30 power companies, including Lanco and Adani have signed FSAs with CIL.
The coal major had earlier said that if price pooling was implemented, all the power consumers would have to bear the impact.
Last month, the Prime Minister's Office (PMO) had asked power companies to sign the FSAs with CIL by November-end even if they don't have binding pacts for sale of electricity.
Meanwhile, the Power Ministry has said that imported fuel is not going to benefit the sector as the cost of generation would go up and also the distribution companies are not in a position to pay for costly power.
"Imported fuel is not going to help us in a big way. Our boiler designs are not suitable for that quality of coal, cost of power generation goes up and the discoms cannot buy costly power," I C P Kesari Joint Secretary Power Ministry said, while addressing the India Energy Forum.
"We can generate more power if domestic coal and gas is available," he said, adding that the Power Ministry is in discussions with the Oil Ministry for supply of gas to the existing plants.
Gas-based capacity to the tune of 8,000 MW is stuck due to scarcity of the fuel, and another 12,000 MW thermal power capacity is awaiting coal linkage.
"8,000 MW gas-based capacity is ready for commissioning but not starting," he said.
"Another 12,000-13,000 MW projects are under construction without any coal linkage," Kesari said.
However, he said that some of these projects will be commissioned next year.