High-level meeting on pooling of coal prices makes little headway

Written by feBureau | New Delhi | Updated: Apr 11 2013, 06:08am hrs
An inter-ministerial meeting on Wednesday could not hammer out the mechanism for pooling of imported and domestic coal prices to mitigate the fuel shortage facing the power sector.

Power, coal and finance ministers met here to work out a strategy for implementing coal price pooling. However, they failed to bridge their differences.

We had detailed discussions on modalities for pooling of price. I will meet my counterparts from the coal and finance ministries soon for discussion, power minister Jyotiraditya Scindia told reporters after the meeting.

The Union cabinet in its meeting on February 5 in principle agreed with the idea of coal price pooling, but deferred a final decision and asked the ministries of power and coal to work out modalities.

The government has mooted the idea of price pooling for coal given the widening gap between domestic availability and supply of coal, which has given rise to the possibility of default by several power projects on their electricity supply contracts. It is meant to help CIL comply with its commitment to meet at least 80% of power companies' coal requirement.

Sources said the draft proposal has outlined four alternate scenarios for implementation of the coal price pooling system.

The first option includes all the existing and upcoming power plants. The second one focuses on plants commissioned post March 2009. The third one includes all plants except 38,000 mw pre-2009 capacity of the state sector. The fourth option includes only 66,000 mw capacity awarded for implementation through tariff bidding route.

The first two options have significant tariff implications for state and central sector power plants. While state sector power plants have been excluded in the third option, state governments' power purchase costs could still increase significantly due to hike in fuel costs of central sector-generating stations.

There should be only a marginal impact on state electricity boards' tariff if the fourth option is decided. According to an estimate, if competitively bid 66,000 mw capacity is allowed to import coal to meet domestic fuel shortage, fuel costs are likely to increase by as much as R0.30-0.35 a unit.