Ministerial panel to meet on April 9

The Coal Ministry has sought the opinion of the fuel buyers on whether they prefer ‘cost plus’ or ‘price-pooling’ mechanism for imports.

To meet the shortfall in domestic coal supplies the buyers are left with little option but to supplement it with imports.

However, this communication from the Coal Ministry has created confusion, as the Cabinet Committee of Economic Affairs (CCEA) on February 5 has already given an ‘in-principle’ nod for the pool mechanism. The Cabinet directed the Coal and Power Ministries to decide the methodology for price pooling within five weeks.

But, Coal Ministry instead has asked the buyers for their preference of pricing for sourcing imported coal.

According to Power Ministry, the Coal Ministry has gone beyond its mandate. “The CCEA never asked to seek buyers’ feedback for options,” said a senior Power Ministry official.

On the other hand the Coal Ministry believes that the CCEA in its ‘in-principle’ nod mentioned a few parameters.

“The CCEA desired that buyers be given an opportunity to exercise their option afresh if they want imported coal in cost-plus or pooling basis,” said a Senior Coal Ministry official. Coal Ministry said that the Power Ministry has not answered some vital questions that need to be known before setting up a pooling mechanism. The nodal Ministry wants these answers to be discussed at the April 9 meeting.

Other conditions include that power stations commissioned till March 2009 will continue to get domestic coal at notified prices.

Nearly 60,000 MW commissioned or to be operational till March 31, 2015 should be offered imported coal.

The Coal Ministry official said, “The Power Ministry has to tell us whether cost of fuel was factored in the appraisal of the independent power producers (16,000 MW) and checked if the project would be viable? What are the sources of fuel mentioned by power producers when financial closure was achieved?”

Moreover, the Coal Ministry wants to know the manner in which the power producers indicated availability of domestic coal. It also wants the Power Ministry to explain how it will ensure the passing of benefits of cheaper coal to end-consumers.

Coal India in its fuel supply agreement has said it would meet 80 per cent of a power plant’s annual contracted quantity.

But, domestic coal would meet 65 per cent demand and the gap of 15 per cent would be imported.

If the buyer doesn’t want to get imported coal on cost-plus basis, Coal India would consider the 15 per cent as deemed supplies.

Coal Ministry’s questions to Power Ministry

Was the cost of fuel factored in in the appraisal of the power producers projects?

How was it checked if the project would be viable?

What are the sources of fuel mentioned by power producers when financial closure was achieved?

How will the Power Ministry ensure that benefits of cheaper coal are passed on to end-consumer?

(This article was published on April 7, 2013)
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