NTPC could opt to move out of the price pooling mechanism for import of coal being run by Coal India (CIL) opening another front in the increasingly bitter fight between the two companies that could potentially unravel Indias energy security.
The option will be discussed at a meeting between finance minister P Chidambaram,coal minister Sriprakash Jaiswal and power minister Jyotiraditya Scindia on Wednesday as a set of measures for the mechanism that has been in the works since November 2011.
A position paper produced by the power ministry for the meeting notes that if Indias largest power producing company moves out from the plan to blend imported coal with domestic production,it will take away demand for coal for 22,000 MW of thermal power.
NTPC buys about 36 per cent of the total coal produced by CIL annually.
Moving out from the pooling will cut the cost of imported coal for NTPC,the paper argues and will also give more freedom to the coal monopoly supplier in the country to price its coal. NTPC and CIL are already locked in another dispute over the quality of coal. The power producer has claimed it is paying higher price for inferior quality of coal while CIL has contested the charge.
A Presidential Directive issued in April 2012 requires CIL to meet the demand for coal from all power generation companies with which it has signed a fuel supply agreement. Since the quantity of coal produced in the country at 452 million tonnes is about 18 per cent lower than the annual demand,it has been asked to import the same.
However as the price of imported coal is about three times higher than domestic coal,the company will average out the prices to insulate its balance sheet.
The higher price will be passed on to the consumers by the power producers as per the agreement worked out by the government. The ministers are expected to send up an acceptable solution for the Cabinet Committee on Economic Affairs to take a final call on the matter next week.
NTPC has stated that they would import coal on their own rather than through CIL as they find it commercially better and thus may be out of the pool, an official told The Indian Express. NTPC expects to import 16 million tonnes of coal this year.
NTPC is unhappy with the price pooling mechanism as it would not be acceptable to the cash-strapped state electricity boards to buy electricity at higher prices.
Besides,nearly 29,000 MW capacity of the company has been commissioned prior to March 2009,which is the cut off period for availing price pooling. It currently has an installed capacity of over 41,000 MW and plans to add around 15,400 MW by 2017.
Importantly,the power ministry has been told by coal ministry that according to internal estimates the pooling mechanism is likely to translate into a cumulative impact of over Rs 4,000 crore on fuel prices for power plants and lead to increase in electricity costs by upwards of 13 paise per unit (kWh).
The inter-ministerial committee on price pooling,which met on Tuesday is still struggling on a final blueprint on the number of power plants to be extended the pooling facility.
* NTPC buys around 36% of the coal produced by CIL annually
* A power ministry paper says that moving out of price pooling mechanism will cut cost of coal and give more freedom to CIL on pricing
* The power producer is not happy with the pooling mechanism as state power utilities would not buy at higher prices