But bulk coal-consuming industries such power have welcomed the move in the hope that in the long run it might catalyse far-reaching reforms in a sector that still remains largely a government preserve.
The Bill will now be presented before the Cabinet Committee on Economic Affairs (CCEA) for approval.
A Group of Ministers (GoM) headed by finance minister P Chidambram finally succeeded in building consensus over contentious provisions of the coal regulatory authority Bill in its meeting here.
Functions, roles and constitution of the coal regulator have been finalised. The main aim will be to increase coal supply to all sectors. Within ten days, we will move Cabinet note, power minister Jyotiraditya Scindia told reporters after the GoM meeting. The draft Bill was referred to the GoM by the Cabinet Committee on Economic Affairs ( CCEA) last year.
We welcome the approval of the coal regulatory Bill by the GoM. However, the step falls short of expectation as the pricing power has not been vested in the coal regulator, said Ashok Khurana, director-general, association of power producers (APP).
Although the proposed regulator will not have any pricing power, it will be mandated to frame rules and methodologies for determination of coal pricing. Further, there are indications that it will have power to draft rules and methodologies for sampling of coal quality. Besides, the regulator will also be responsible for ensuring compliance with mining plans. That means CIL will have to benchmark its operational efficiency against regulatory benchmarks to fully pass on mining costs to consumers. The regulator will have the mandate to settle commercial disputes between coal suppliers and consumers.
As a result, investors' confidence in bulk coal-consuming industries such as power, steel and cement as well as the coal sector itself should get a big boost. However, state-owned Coal India ( CIL), which is operating as a monopoly currently, could feel the regulatory heat. CIL has opposed TL Sankar committees recommendation to set up an independent coal regulatory authority. The committee was formed by the government to suggest reform measures for the coal sector. Currently, the CIL enjoys power to unilaterally revise coal prices. What is more, it cannot be held accountable for supplying coal that is inferior in quality to what has been committed by the supplier.