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Home News Power Sector News Power cos to seek coal price pooling

Power cos to seek coal price pooling

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CoalAfter the prime minister's office (PMO) nudged Coal India Ltd to meet the coal requirement of power plants, heads of India's most powerful corporates have shifted their focus to modalities. At its first follow-up meeting with the committee of secretaries (CoS) headed by Prime Minister Manmohan Singh's Principal Secretary Pulok Chatterjee, on 23-02-2012, a delegation of tycoons is going to push for price pooling of imported coal.

"Pooling of prices to spread the risk of high input cost on account of imported coal and seeking gas allocation will be discussed at the meeting," a private industry source close to the development said.

Allowing captive coal mine owners to sell the fuel in the open market and seeking gas allocation for new projects would also be on the agenda.

The CoS was formed after the delegation met the PM on January 18. The PMO later asked CIL to sign fuel supply agreements with power companies at a higher commitment level of 85 per cent. CIL was also asked to resort to imports if its production fell short, fuelling a debate over price sharing of high-cost imports.

The source said the meeting was likely to be attended by at least seven members of the delegation, including Reliance Power Chairman Anil Ambani, Tata Power Deputy Chairman Cyrus Mistry, Jindal Power Chairman Naveen Jindal, Hinduja Group Chairman Ashok Hinduja and Adani Power Chairman Gautam Adani. Under the pooling proposal, floated first by the Planning Commission, domestic and imported prices of coal were to be averaged out to allow consumers avail of uniform rates irrespective of the source.

The proposal was aimed at taming the rapidly increasing input costs for end-use industries by bringing uniformity in raw material rates in key sectors of power and steel.

Experts say taking a call on the proposal is unlikely to be easy for the PMO due to opposition from various quarters. In a recent letter to the PMO, the coal ministry called the proposal impractical and untenable.

"Any mechanism to share the burden of imported coal by pooling it with domestic coal prices would imply cross-subsidising power generation costs, contrary to power sector reforms and provide for benefiting a few imported coal-based plants at the cost of others," the ministry said.

The proposal is also in conflict with the government's broader intention to move towards fuel price rationalisation by integrating these with those prevailing in international markets, and doing away with subsidies. The private lobby group is likely to raise concerns over unavailability of gas for power plants. Around 8,000 Mw of gas-based capacity is likely to be commissioned in six months. "This includes 4,000 Mw that will come on stream by March, but supply has not been tied up," the source said.

Other demands less likely to cut ice with the PMO include allowing commercial sale of surplus coal produced from captive blocks and removal of five per cent customs duty and five per cent countervailing duty on imported coal.

Source- Business standard


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