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President directive likely on Coal India Ltd for price pooling

Feb 05 2013, 09:19 IST
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SummaryPooling of domestic and imported coal could push up electricity prices by at least 13p per unit

The Union Cabinet is likely to approve the imposition of a ‘presidential directive’ on Coal India Ltd for implementing the price pooling of domestic and imported coal for supplies to the country’s power stations. The pooling of coal, according to internal estimates of the coal ministry, is likely to translate into a cumulative impact of over Rs 4,000 crore on fuel prices for power plants and lead to increase in electricity costs by upwards of 13 paise per unit (kWh).

This will be the second presidential directive to be imposed on CIL by the government after an earlier directive on signing of fuel supply agreements with power firms.

Coming in the wake of direction issued by the Prime Minister’s Office, the coal ministry has sought approval on pooling prices of nearly 20 million tonnes of coal to be imported from abroad with that of domestic fuel this fiscal. The matter is to come up before the Cabinet Committee on Economic Affairs (CCEA) on Tuesday. Imports have been necessitated by the shortage of domestic coal production.

The proposed mechanism would be implemented for 2013-14 and 2014-15 under a ‘special dispensation’, wherein fuel security would be ensured not only for 60,000 MW capacity to be commissioned during the Twelfth Plan period but also for an additional 7,000 MW to be operationalised during the period.

The power ministry had earlier suggested that CIL should import coal to bridge the supply deficit, duly adjusting the gross calorific value of indigenous and imported coal by factoring in supply at a trigger level of 90 per cent and 80 per cent of the assured offtake for plants commissioned before March 31, 2009 and after that date, respectively.

“But to do so, it would be necessary to approve issuance of another presidential directive to CIL to act upon the proposed mechanism,” a senior coal ministry official said. The reason is that while coal imports have been incorporated in the FSAs, price pooling is yet to be part of such agreements. However, CIL’s buyers have been given the choice in the FSA of opting out of the supply of imported coal by foregoing the portion pertaining to imported coal in their annual contracted quantity.

The coal ministry has computed the price of pooled coal to be around Rs 4,000 more on a cost plus basis, while electricity generation cost would increase by 13 paise a unit. CIL would also levy

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