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Home News Power Sector News Price pooling for coal to benefit some companies: Bengal

Price pooling for coal to benefit some companies: Bengal

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MamataMamata Banerjee has again taken on the UPA government, accusing it of extracting higher electricity charges from households and factories to pay for gross miscalculation by business houses on the cost of imported coal. The West Bengal government is upset with the Centre's move to allow price pooling for coal, whereby power plants pay a uniform average price for domestic and imported coal, in effect raising fuel costs for those that have secure contracts with Coal India and reducing the price for plants that use a lot of imported coal.

The state's power secretary, MK De, said: "Price pooling will help a handful of companies that built power plants based on imported coal mainly in coastal regions. Their calculations went wrong and they started making losses owing to rising international coal prices. Price pooling will help these companies."

Price pooling will enable these companies to receive coal at lower prices and minimise their losses. It will also shield their banker's accounts from turning into non-performing assets." Another official said groups such as the Tatas and Adani would gain from price pooling.

The Tata and Adani Groups declined comment. De's remarks came on the eve of a scheduled meeting of Power Minister Jyotiraditya Scindia with top industry leaders, including Cyrus Mistry of Tata Group, Anil Ambani of Reliance Power, Manoj Gaur of Jaypee Group , GM Rao of GMR, and Sudhir Mehta of Torrent Group.

The industrialists are members of the newly formed 20-member advisory group for reforms in the power sector that also includes SBI Chairman Pradip Choudhary and ICICI Bank CEO Chanda Kochchar, who represent financial institutions, and Power Grid Corp CMD RN Nayak and Bhel CMD B Prasada Rao on behalf of state firms. They are expected to discuss power reforms.

Sanjiv Goenka, vice-chairman of CESC, which supplies electricity in Kolkata, said price pooling would hurt distribution firms. "Any such measure will impact distribution companies adversely and will help new independent power producers positively. Price pooling will result in increased coal prices, which in turn will increase cost of generation and increased burden for consumers," he told ET.

Several power producers are seeking renegotiation of their power purchase agreements on the ground that imported coal prices have shot up dramatically, particularly from Indonesia because of a government decree, which they argue would trigger the force majeure clause in their contracts and allow renegotiation of electricity prices.

Under the pooling system, the burden of rise in coal prices as a result, however, will have to be borne by consumers - both household and industrial - who will see a steep increase in power tariffs.

West Bengal power minister Manish Gupta, who refrained from naming any specific unit, said: "Under the pooling mechanism, existing users of domestic coal will subsidise a part of the imported coal requirement of new power facilities. It will help new independent power producers in a big way because they will be able to source coal at prices lower than international prices from Coal India. Existing power units in West Bengal and the ones near mines, however, will be adversely affected as their prices will go up considerably. Pooling will also help units that are located very far off from coal pits - likes those in Gujarat and Rajasthan."

Source- ET


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