The Planning Commission has junked a proposal by power producers to mandate Coal India act as a banker for surplus coal. Instead, it has sought the Union Cabinet’s approval in allowing the holders of captive mines to transfer their surplus produce to other power, steel and cement utilities.
Conceding that the proposal to ask Coal India to act as a banker for storing surplus coal from the captive mines is not possible within the existing legal framework, the plan panel has told the Cabinet Committee on Investment (CCI), last week, that nothing stops the government from allowing transfer of surplus fuel to other approved utilities in power, steel and cement sectors. To bolster its contention, the commission has cited the advice given by Attorney General GE Vahanvati in case of Sasan ultra mega power project (UMPP) wherein the government had allowed transfer of surplus coal to other unit.
“The advice of the AG was quite clear. While answering queries on whether the government has any right to permit the allottees of captive block industries or those allocated to UMPPs to use surplus coal for other projects, clearly confirmed that this is feasible,” the Commission said in its draft note to the CCI.
Countering the existing rules that surplus produce ranging from 10 to 25 million tonne a year must be sold to Coal India or its subsidiaries, the planning body said this needs to be done away with to enhance the fuel’s output.
At the behest of the association of power producers (APP) in May last year, the commission’s deputy chairman Montek Singh Ahluwalia had subsequently written to finance minister Chidambaram championing the proposal. He, of course had cautioned that safeguards would have to be ensured to prevent the coal block holders unduly benefiting from the proposed system. Ahluwalia had announced setting up of a committee under the Commission’s member B K Chaturvedi, who oversees the energy sector there, in giving a policy blueprint on coal banking. The panel comprised of top bureaucrats from finance, coal and power ministries. The panel had 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 Chaturvedi panel in its report last month said it would not be feasible to implement the proposal as it is legally untenable while Coal India Limited (CIL) itself is reluctant to act as a banker. According to the APP’s blueprint, CIL would act as a banker in storing the surplus produce and return it either in one lump sum or in installments.
However, to prevent the captive miners from profiteering, the committee has suggested that in formulating a comprehensive policy on disposal of surplus coal, the extra fuel should be priced as per CIL’s prices for various grades of coal. The coal banking system, if implemented, should be maximum for a period of three years following which the government should review its efficacy.