Govt works on plan to ask private coal miners to sell surplus to CIL

Producers will have the right to buy back the fuel from Coal India in future at a profit

Written by Priyadarshi Siddhanta | New Delhi | Published: August 12, 2013 1:05 am

After exhausting all available options to increase coal production,the government has decided to incentivise private sector coal mines to sell their surplus produce to state-run Coal India but with the assurance they can get it back at a profit in future.

To ensure the proposal has wide-ranging support,the government plans to set up a committee that will include financial sector luminaries like HDFC Bank chairman Deepak Parekh,ICICI Bank chief Chanda Kochhar and others to fine tune it.

The plan is essentially a simple one. Private sector coal miners will be encouraged to produce more coal than they need for their units. The excess production will be sold to Coal India and the producers will have the right to buy back the coal in future if they need but at a price close to the current price.

Coal India will basically act as a coal bank. Endorsing the proposal,deputy chairman of Planning Commission Montek Singh Ahluwalia has,however,said the government should not be seen as extending subsidies to independent power plants through the plan.

Commission member BK Chaturvedi,who oversees the energy sector in the Plan panel,has pointed out that it is quite possible that this could become a reality if the price of coal rose in future since the committed offtake of the mineral at current prices could be seen as a subsidy.

“Obviously,if the price behaviour is in reverse direction,no such criticism will be made. But it is not possible to predict the price behaviour of coal,” Chaturvedi has reasoned.

Endorsing the contention,Ahluwalia has asked Chaturvedi to chair a committee of experts in which eminent personalities like Parekh,Kochhar and coal secretary Sanjay Kumar Srivastava would be the key members. While Ahluwalia was also keen that the finance ministry’s chief economic adviser Raghuram Rajan is inducted into the panel,but with his elevation as the RBI governor,another Commission member,Saumitra Chaudhuri,is likely to be inducted as a member.

The panel has been tasked with examining the merit of the coal banking system and also formulating a policy for utilisation of surplus coal without the government attracting any criticism in this connection.

The Planning Commission has accordingly advised the finance ministry that the proposal merits consideration. “The arrangement would be one of sale at a CIL nominated price linked to a forward purchase of coal from the PSU at a suitably stated price,” the Plan panel has written in a note to the ministry. Indian coal production has stagnated at about 470 million tonnes since 2011-12,as the sector battled charges of corruption in allocation of mines and no upgradation of technology by monopoly producer public sector Coal India.

Also the Commission is sure the arrangement will not violate the requirement that captive coal mines should produce only to meet captive requirements.

“It only shifts the time period of coal production by encouraging extra production in excess of the current requirement in the next few years,thereby reducing the need for CIL to import coal,” it says.

The proposal has been mooted by the Association of Private Power Producers,which has suggested in its proposal that CIL would make an “advance payment” during the banking period to the captive block holder. “CIL (should) sell the coal to its customers and effectively recover the advance payment from them at a price,which may include some trading margins for coal supply.”

* Private sector coal miners will be encouraged to produce more coal than they need for their units. The excess coal will be sold to Coal India and the producers will have the right to buy back the coal in future at a price close to the current price

* A panel to fine tune the proposal will be chaired by BK Chaturvedi while Planning Commission member Saumitra Chaudhuri,HDFC Bank chairman Deepak Parekh and ICICI bank chief Chanda Kochhar are likely to be inducted as members

* Panel to been tasked with examining the merit of the coal banking system and also formulating a policy for utilisation of surplus coal without the government attracting any criticism

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