Coal price pooling shelved

Last Updated: Tue, Apr 23, 2013 04:25 hrs

The country's power producers would not be able to reap the benefit of coal price pooling for their projects, as the government on Monday shelved a proposal to this effect after a consensus on the likely impact on tariff could not be reached.

The proposal, under the pooling mechanism, was to supply costly imported coal at uniform rates to power firms. This would have made coal costlier for old stations but cheaper for new ones (those commissioned since 2009).

The decision to bury the proposal came at a meeting of the Cabinet Committee on Economic Affairs (CCEA). "Coal price pooling is out of the window," a source present at the meeting said. CCEA had decided power plants with capacity of 60,000 Mw and commissioned before 2009 would continue to get coal from CIL as before, he added.

"However, the plants commissioned after 2009 will have the option to source imported coal from Coal India on cost-plus basis or go for own imports," he said. More than 60,000 Mw of capacity was supposed to come on stream between April 2009 and March 2015. Around 36,000 Mw of this has been commissioned. CIL has already committed itself to supplying coal to meet 80 per cent of their annual contracted quantity, including 65 per cent from domestic linkages and 15 per cent via imports.

The 15 per cent imported coal supply works out to 117 mt this financial year, increasing up to 260 mt by 2017-end. After on Monday's decision, power firms, mainly private ones, would have to shell out more to source this coal. The decision has come as a dampener, particularly for developers of projects awarded on tariff-based bidding where fuel cost is not a pass-through to consumers. For CIL, pooling was price neutral, anyway.

  • May '12: CIL says will meet 15% supply commitment via imports, raising questions on who bears the extra cost
  • Jun-Jul '12: PMO discusses pooling as a way to spread the burden; coal ministry says states may oppose proposal
  • Sep '12: CIL discusses with power utilities
  • Nov '12: 5 utilities agree; states oppose
  • Jan '13: CEA gives report on impact, says pooling will benefit private firms more; coal ministry finalises Cabinet note
  • Feb '13: CCEA gives in-principle nod, restricting pooling to post-2009 projects
  • Apr '13: Proposal shelved by CCEA

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