Price pooling most difficult: Coal Min

The coal ministry has conveyed to the Prime Ministers Office that it may not be possible to accept Planning Commissions proposal to institutionalise

The coal ministry has conveyed to the Prime Ministers Office PMO that it may not be possible to accept Planning Commissions proposal to institutionalise a price pooling mechanism to encourage import of coal. The arrangement,the ministry argues,will hike the price of domestic coal by about 6 per cent and Coal India Limiteds buyers will have to shell out more money to secure imported fuel.

In a note sent to the PMO last week the ministry said,based on an exercise carried out by the CIL,that on a pooled price system the import of 4 Million Tonne of coal would increase the price of domestic coal by about 3 per cent and with each additional increase in volume of imported coal by 1 MT,the price increase will be about 0.7 per cent. For power utilities,an import of 8 MT would mean an increase of 6 per cent on an average across various subsidiaries of CIL.

The Planning Commission has been pitching for a quick implementation of the price pooling method. The body has told the coal ministry that it should ask CIL to import the desired quantity of the fuel for NTPC and other electricity generation utilities. The coal ministry had agreed to entrust the CIL to do so and include the provision in the Fuel Supply Agreements with utilities.

But the proposal to pool the prices of imported and domestic coal is an extremely difficult proposition. Firstly,because coal is not a homogenous material and its quality varies from coalfield to coalfield and accordingly its cost varies. Secondly,the difference between the prices of imported and locally mined coal is huge and finally,the consumers may be willing to import it directly rather than doing it through CIL, the ministry told the PMO.

Besides,the proposed coal imports for the utilities will have to be outside the existing FSAs as they do not have any provision to this effect as the entire quantum of the Annual Contracted Quantity has been envisaged to be indigenous,it argued.

The proposed mechanism envisages pooling prices of imported and domestic coal as the landed price at the ports. Since prices of domestic coal with similar calorific value vary from company to company and since the landed price of imported coal may vary from port to port,the pooling mechanism is bound to be a complex exercise,the coal ministry said.