Wanted: Regulator For Coal Prices

New Delhi, Sept 2 | Updated: Sep 3 2004, 05:30am hrs
Taking a serious view of the unilateral revision in coal prices, the power ministry, in a note to the Cabinet secretariat, has made a strong case for setting up a coal regulator in the absence of any guidelines or a regulatory mechanism.

Coal India Ltd (CIL) had recently increased the prices of all grades of coal by 16.7 per cent after a gap of two years. This meant an average 6 paise per unit increase in fuel cost for power generation. The power ministry has contended that the revision had no linkage with the actual inflation-linked indices.

Asking the Cabinet secretary to convene a meeting of the committee of secretaries (CoS) to consider the case of coal shortage, the ministry has also pushed for allowing private sector in coal mining besides enlarging the scope of captive mining.

Private sector entry into coal mining requires an amendment to the Coal Mining (Nationalisation) Act.

The power ministry does not see the option of importing coal as a long-term solution since the prevailing price of imported coal does not warrant its extensive usage. A case in point is the Indonesian coal which has a gross calorific value ranging between 5,500-6,500 kcals/kg. It is being traded at around $60 per tonne which when transported to a coal-based power plant will be around Rs 4,800-4,960 per tonne.

The fuel cost generation in such a case would be Rs 1.90-1.98 kilowatt per hour against the delivered cost of Indian coal at about Rs 1,340 per tonne with a fuel cost of generation of Rs 0.80 per kwhr. Coal under a long-term contract would also not come cheaper.

In its note to the Cabinet secretariat, the power ministry has also said that shortages should not be used as a justification for unilateral increases without serious efforts to reduce the demand-supply gap through increased supply.

The ministry also proposed that mine development plan of the seven subsidiaries of CIL should be in line with the expansion plans of various stakeholders like power and steel plants.

The delay in development of mines linked to expansion projects of National Thermal Power Corporation (NTPC) would also lead to under utilisation of plants which are expected to be commissioned shortly, said a power ministry official.