Opinion Search for a pricing formula
Despite a year and half since the first proposal on price pooling of coal was proposed by the Planning Commission and the Central Electricity Authority
Despite a year and half since the first proposal on price pooling of coal was proposed by the Planning Commission and the Central Electricity Authority,the difference between the producers and the users have not been papered over.
Just weeks before the pricing formula travels to the Cabinet,the power ministry wants to ensure imported coal is priced cheap enough for the power generating companies to remain viable. But the coal ministry is equally keen to ensure the exercise is revenue-neutral for Coal India (CIL).
CIL therefore will prefer to import coal at the prevailing international prices and sell to buyers on a cost plus basis. In simple words prices of imported coal would be a total pass through. But power companies feel a certain amount of cross subsidisation between the domestic and imported coal is necessary to keep the final price of pooled coal,soft.
With a consensus on the issue remaining elusive,the coal ministry has offered the power producers a plan to lower the price of imported coal,but raise the price of top grade domestic grades of coal.
The Union Cabinet has to take a call on which format to use. Budget 2013-14 has also mentioned that blending imported and domestic coal has to be ensured to fuel the power plants. An internal note prepared by the coal ministry shows the import of 100 million tonne of coal in 2013-14 at prices ranging between $90-110 a tonne will cost about Rs 50,000 crore for the economy. Neither CIL nor the power companies want this burden to devolve on them even partially.
As a result,though under the Presidential Directive CIL has to sign fuel supply agreement with power producers,this concern has held up the agreements. The producers are reluctant to sign on unless there is clarity on the matter.
Priyadarshi is an Assistant Editor based in New Delhi.
priyadarshi.siddhanta@expressindia.com
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