Power Ministry Floats Cabinet Note on Coal Price Pooling: Report

The Power Ministry has floated Cabinet note for pooling of imported and domestic coal for deciding price of the raw material for plants commissioned after 2009, a proposal aimed at meeting increasing demand for the dry fuel.

The ministry is of the view that pre-2009 plants should not be included in this arrangement as share of the public sector is 98 per cent of the total capacity.

Sources said the proposal has been circulated among ministries concerned.

"Whereas in post 2009 capacity the public and private share is equally divided, therefore the proposal would be advantageous for plants commissioned after that year," a source said.

As per government estimates, if the pooling is confined to post-2009 plants the resultant increase in per unit cost of power generation is expected to be 74 paise for 2014-15, 44 paise for 2015-16 and 5 paise for 2016-17.

"To make this option work it would be necessary to make it mandatory for all the post-2009 power producers to take domestic coal only at the pooled price," the source said.

The ministry's earlier consultations with the central and state sector utilities suggested that they had strong reservations about the price pooling mechanism of pre-2009 plants.

If pooling of imported coal is done with domestic coal to be supplied for both pre and post 2009 plants, as per official estimates, the approximate increase in per unit cost of generation would be 23 paise for 2014-15, 17 paise for 2015-16 and 2 paise for 2016-17.

The ministry has said that for pre-2009 plants, the coal supply must be kept at the existing level of 90 per cent of the annual contracted quantity.

For post-2009 plants the supply must be made at 70 per cent of the Letter of Award (LoA) in the fourth quarter of 2014-15, 75 per cent in 2015-16 and 80 per cent in 2016-17.

The ministry's proposal will not be applicable to imported coal based projects.

The Power Ministry has sought an appropriate decision be taken on the coal imports and its price pooling.

The net coal requirement works out to about 433 million tonnes (MT) in the current year, about 500 MW in 2015-16 and about 548 MT in 2016-17.

On the issue of tapering linkage policy, the Ministry of Coal will revisit the policy which would facilitate supplies to coal block linked power plants if the development of captive mine is delayed beyond normative date of coal production for reasons beyond the control of developer.