REVISED COAL POOL PRICING

Power producers could see an 8-21 per cent increase in coal price if the revised mechanism for price pooling is implemented.

It is yet to be seen if all stakeholders agree to the contentious issue of price-pooling.

Coal India and Central Electricity Authority (CEA) have worked out a new scheme of price pooling. According to this, the differential between higher price of imported coal and indigenous coal is to be spread over the entire domestic coal grades.

Simply put, while the end consumer will pay single price, the power producers will have to bear the burden of differential between imported and indigenously produced coal.

This spreading of additional cost will result in increase of domestic coal price of about eight per cent (2012-13), 21 per cent (2013-14), 16 per cent (2014-15) and seven per cent (2015-16).

This model is proposed to keep the price of imported coal at the same level of indigenous output. However, prices can go up further if Coal India fails to achieve the production target of eight per cent compounded annual growth rate (CAGR).

Coal India Chairman and Managing-Director S. Narsing Rao said that there were a few technical issues being discussed with all stakeholders.

“The increase depends on quantity of coal to be imported and price of international coal. CEA, Coal and Power Ministries are involved in the discussions,” he told Business Line.

Principal Secretary to Prime Minister Pulok Chatterjee, who is reviewing developments in the coal sector, is understood to have asked Coal India and CEA to have one notified price for each grade of coal. This would include either imported or domestic coal, so that cost becomes pass-through.

In addition, Coal India has cautioned the nodal Ministry that the present projections are made on the basis of prevailing imported price of coal (6,500 kcal/kg), freight, exchange rate and other statutory levies. Any change in these factors would result in a different notified price of coal.

Coal India has made it clear that it is ready to meet 65 per cent of the power companies’ fuel requirement for the first two years through domestic production. This would be despite signing a fuel supply agreement for meeting 80 per cent of the demand.

If power companies do not agree to pool pricing, Coal India would consider the gap of 15 per cent as deemed supplied.

siddhartha.s@thehindu.co.in

(This article was published on November 19, 2012)
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