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Pooled pricing of coal will become a reality only from the next financial year, as the stakeholders have not been able to arrive at a conclusive framework.
The Ministries of Power and Coal had to implement this pricing mechanism in the current fiscal following the Cabinet Committee on Economic Affairs (CCEA) in-principle nod on February 5 to implement it.
But, the two ministries were unable to reach a consensus on issues such as differential pricing (difference between the imported and domestically produced coal) and how much power capacity is stranded because of fuel shortage. The Coal Ministry is not in sync with the Power Ministry’s assessment of stranded capacity because of coal shortage.
According to the Power Ministry, the shortfall of about 18-20 million tonnes of coal for power sector was to be imported in 2012-13 and sold through pooling mechanism.
This now would be rolled over to the next financial year.
While Power Ministry is projecting the shortfall, Coal Ministry claims that during the current fiscal Coal India has been able to meet its annual contracted quantity (ACQ).
Coal India supplied 11.1 per cent more coal to power plants at 246.78 million tonnes (222.14 million tonnes) during April-December 2012 compared to the corresponding period previous year.
The supplies to the largest power producer NTPC increased by 18.1 per cent at 94.98 million tonnes (80.43 million tonnes) in the first nine months of 2012-13.
According to senior officials in the Coal Ministry, who are working towards implementing this pricing mechanism, a framework may be in place only by April 7. This would have to be again vetted by the CCEA before implementation.
“The Coal Ministry has asked Department of Financial Services at Ministry of Finance to give details of power plants that are funded by banks or other financial institutions, which face danger of turning into non-performing assets because of coal shortage,” said one of the officials at the Ministry.
These details would be discussed at an inter-ministerial panel meeting on March 14. The panel is headed by Coal Secretary Sanjay Kumar Srivastava.
The demand-supply dynamics
The pooling mechanism for coal is proposed to meet the demand-supply gap for the fuel by power producing stations. In 2007, the idea was mooted by the Planning Commission and was supported by private power producers facing coal crunch.
Coal India is expected to supply up to 80 per cent of the annual contracted quantity of the power plant. The PSU miner is confident of meeting up to 65 per cent of demand, leaving the rest to be covered by imports.
Through this short-term mechanism, all coal consumers in the power sector will have to bear a higher price.
However, the power plants up to certain distance from ports would only physically get imported coal to blend in their units. The increase in coal cost is because imported fuel is expensive compared to indigenous.
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