Jaiswal red flags Plan Panels proposal on coal banking

Jaiswal said Coal India is opposed to the proposal as it cannot pledge returning the coal in view of its surging demand.

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Coal minister Sriprakash Jaiswal has opposed the Planning Commissions move to make Coal India CIL function as a bank for storing the surplus produce from captive mines saying it may unleash plethora of problems for the coal sector.

Acting on a proposal of the Association of Power Producers APP,the Planning Commission has finalised a blueprint suggesting ways through which the proposed coal banking mechanism can be implemented.

The APP,a representative body of merchant power producers had pitched its banking proposal to the Plan panel on June 3.

In its presentation,the APP had said that fuel production from the captive coal mines could be rendered surplus owing to mismatch between mine development and progress of end-use plant leading to a situation where coal production has started but the plant is not ready.

Second,due to increased mining capacity owing to technological improvements,around 25 million tonne could be rendered surplus by 2015-16. It is this surplus produce that APP wants to bank with CIL. This surplus coal would reduce the import dependence of the generation companies,the group said.

Jaiswal said that the proposal seeks to mandate CIL to extend an advance payment in lieu of storing the surplus produce during the banking period.

This is against the spirit of the existing guidelines on selling the surplus produce. The present mechanism stipulates that any surplus produce would have to find its way to the Coal India Limited or its nearest subsidiary for its onward distribution through e-auction to fuel-starved utilities. Why should CIL pay for the banked fuel, he told The Indian Express.

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Jaiswal added that the law ministry has also expressed concerns whether the proposal is viable under the Coal Mines Nationalisation Act 1974. It will have to be legally ascertained whether coal banking,which entails commercial transaction,should be allowed as trading of the fuel is disallowed under the Act. Initial due diligence by the legal department suggests that the proposal could be unviable under this legislation.

He said there are concerns in the coal ministry that in a rush to produce surplus coal,it must be remembered that better recovery of resources should not lead to paucity for the plants in later years.

What also needs to be resolved is the issue of transfer price for the additional fuel. The APPs suggestion of linking this price to e-auction price is untenable as it is not a market driven price. It should be benchmarked with Coal Indias notified price,to which the Planning Commission is agreeable to, he said.

Jaiswal said Coal India is opposed to the proposal as it cannot pledge returning the coal in view of its surging demand. This has led the Commission to propose in its draft report to allow cashless transfer of of coal from one project to another for a maximum period of three years.