State writes to Union Coal Secretary; CIL board meet today

The West Bengal Government today formally opposed the Union Government’s move to force existing users of domestic coal to subsidise part of the imported coal requirement of new power generation facilities.

The opposition assumes significance as West Bengal is a coal bearing State and is ruled by UPA’s ally Trinamool Congress.

A day before the all-important Coal India board is scheduled to meet in Delhi on Tuesday to finalise amendments in fuel supply pacts (FSA) to be signed with facilities came on stream after March 2009; the Bengal power ministry communicated its ‘strong’ objection to the move to the Union Coal Secretary. A copy of the letter was forwarded to CIL.

On July 18, the State Government-controlled generation utility wrote to the Central Electric Authority (CEA) opposing any move to disturb existing supply contracts for the sake of the proposed FSAs.

Cheaper than domestic coal

According to the proposal mooted by the Union Government, CIL should supply nearly 18-20 million tonne of imported coal of 6300 Kilo calorie (Kcal) gross calorific value (GCV) under the new FSAs at a price of Rs 4,500 a tonne.

This is lower than the current pit head price (with duties) of comparable domestic coal in West Bengal mines. West Bengal and Jharkhand are the two major producers of such coal in India.

Over $30 a tonne subsidy

With international coal prices softening in the last two months, the 6300 kcal GCV South African coal is now available in Indian ports at approximately Rs 6,200 a tonne (approximately $114 a tonne including shipping and other port charges).

Accordingly, if the pooling proposal is implemented, coastal power plants may gain by nearly Rs 1,800 ($32) a tonne, at current global market prices. This may go up as international prices rise.

Stormy board meet?

Meanwhile, sources anticipate CIL board meet to bec a stormy one, if independent directors maintain their opposition to price-pooling proposal, as they did on July 31.

With increasing insistence on the part of the Government, market sources anticipate Tuesday’s board may even resort to voting to clear the proposal.

(This article was published on August 6, 2012)
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