Coal India board says no to price pooling mechanism

The Coal India management on Friday failed to convince its board of directors on the feasibility of a price pooling mechanism to fulfil its proposed supply commitments to power plants commissioned since April 2009. Independent directors played a key role in opposing the proposal. Proposed by the Union Government, price pooling would largely help the new coastal power plants, mostly in the private sector, get imported coal at a subsidised price.

The subsidy on imported coal should be recovered through an increase in prices of domestic coal, mostly consumed by the Central and State-owned utilities.

“The board has asked the management to come back with a business model (on price pooling),” Chairman and Managing Director Narsing Rao told newsmen after a marathon seven-hour board meet.

Asked if there was any opposition to the “price-pooling” proposal, Rao said: “It’s an internal matter.”

Cost-plus imports

According to the CIL Chairman, the board has approved the fuel supply agreement terms (for new power plants) for supply of 65 per cent domestic coal component.

For the remaining 15 per cent aggregate import content, the board discussed and gave consent to a cost-plus import model, whereby consumers would pay for the price of imports. The board has already set the minimum supply commitment at 80 per cent under the new FSA.

The board, however, did not agree to the viability of the proposal to pool the price of imported coal with domestic coal.