The Government’s in-principle nod for ‘pooling’ of prices for coal produced as well as imported by Coal India Ltd (CIL) is unwarranted and ill-conceived. The move – which entails the state-owned miner supplying coal of equivalent grade, whether its own or imported, at a single price to all power stations in India – harks back to the days when the Government made available iron ore, pig iron, coal or aluminium at the same rate across the country through a so-called freight equalisation policy. That policy, abandoned in the 1990s, helped create foundries in places likes Batala in Punjab, but robbed mineral-rich areas in West Bengal, Jharkhand, Orissa or Chhattisgarh of their natural location-based advantage. Coal price pooling would end up doing as much, since it aims at bringing the cost of imported coal (roughly Rs 6,000 a tonne) closer to the Rs 4,500 levels for indigenously mined material of comparable quality. That, in turn, would be done by adjusting the prices of domestic coal upwards; by spreading it over all power stations, this could be limited to around Rs 100 a tonne, translating into an additional electricity price of 10 paise per unit.
The Government has defended the proposal, saying that CIL cannot meet the fuel supply agreements (FSA) it has signed with new power plants only through coal produced from its own mines. Since that leaves no option but to import the balance requirement, there has to be some mechanism to make it feasible for coast-based power plants to burn imported coal. But this is hardly a convincing argument. Pooling would amount to penalising plants commissioned prior to March 2009. It is not the fault of these stations that they are today being supplied almost their entire requirement through indigenous coal. Moreover, if West Bengal or Orissa have huge coal deposits, why should they be denied the possibility of leveraging this advantage – that too, through artificial price equalisation – to generate cheaper power that might help attract investments? Whether these States are actually doing so, or simply frittering away this advantage, is not the issue here.
If power from imported coal is costlier, the only solution is to allow producers to pass it on to consumers. The other alternative is increasing domestic coal output. Both these call for decisive reform actions. Today, consumers are willing to pay for reliable power. The only thing standing between them and producers are the State Governments, which are neither allowing tariff rationalisation nor open access enabling them to contract directly. The Centre, on its part, has shown little inclination to dismantle CIL’s coal production monopoly and open up the sector to private and foreign miners. Nor has it effectively addressed the various environment and forest clearance-related issues impeding augmentation of domestic production. Price pooling is ultimately yet another of those expedients to evade the real issues confronting the energy sector.
Keywords: pooling of prices for coal, Coal India, domestic production, Price pooling, energy sector. power stations, equalisation policy, CIL
Comments:
Government’s ‘in principle’ decision to approve the policy of price pooling of imported and domestic coal for the supply to power plants is not in the right direction. With our coal-fired electricity plants accounting for 56 per cent of country’s total installed electricity capacity, indicates the plants’ enormous dependence on coal. The mismatch between growing demand because of increase in domestic as well as industrial requirement and supply because of limited resources, has contributed for the crisis of power shortage over a period of time. Sadly, more than one third of India's rural population and 6% of urban population have no reach to electricity still now. In this background, once put in place, the new policy of price pooling will destabilse the whole gamut of coal production and distribution as also the price mechanism of coal. Accordingly your suggestion for exploring alternative sources of energy such as hydroelectric, solar and nuclear power stands to be a viable one.
Coal India cannot be held responsible for suppling entire coal requirement of the country. It has numerous constraints mainly for acquisition of land. On the contrary, state owned power houses are reluctant to give due price of coal for the reason one another. FSA will be a great problem for CIL as it would not be able to supply agreed quantity and thus be penalised. Till 1990, Govt of India was not concerned for supply of coal to the PSU power companies like NTPC, DVC. Since then, private power companies steps into this field and raised the issue and ultimately forced CIL for FSA. Coal pooling pricing may be the only solution for CIL to make the field to some extent level as the poser house build with the concept of using imported coal are now depending upon indeginous mineral as the cost of imported coal is around Rs 6000 per MT while countr's price is only Rs 4500 per MT of same quality. Many of the power companies were allotted coal block but they have not started operation.
Coal India cannot be held responsible for suppling entire coal requirement of the country. It has numerous constraints mainly for acquisition of land. On the contrary, state owned power houses are reluctant to give due price of coal for the reason one another. FSA will be a great problem for CIL as it would not be able to supply agreed quantity and thus be penalised. Till 1990, Govt of India was not concerned for supply of coal to the PSU power companies like NTPC, DVC. Since then, private power companies steps into this field and raised the issue and ultimately forced CIL for FSA. Coal pooling pricing may be the only solution for CIL to make the field to some extent level as the poser house build with the concept of using imported coal are now depending upon indeginous mineral as the cost of imported coal is around Rs 6000 per MT while countr's price is only Rs 4500 per MT of same quality. Many of the power companies were allotted coal blocks but they have not started operation in it.
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