Coal price pooling likely only for power plants after March 2009

Faced with stiff opposition from power utilities over the Centre's move to introduce coal price pooling which could increase price of the fuel by R100 a tonne (5%) or more, the coal ministry may restrict the mechanism only to power projects getting commissioned after March 2009. This means the pooling mechanism would apply only for about 60,000 MW worth of new capacities including those likely to be commissioned by March 2015, leaving out between 80,000 MW and 90,000 MW of running capacity. Also, to start with, the pooling will be done only for 2013-14 and 2014-15, to gauge the policy's implications before deciding whether to extend it.

Among the projects that might shift to price pooling are Reliance Power's Rosa, NTPC Simadri and Sipat, Lanco's Anpara, Adani's Mundra, Indiabulls' amravati and GMR's Kamalanga.

Under the pooling system, coal prices would be very close to international prices. India's coal consumption is estimated to be around 500 million tonnes in 2012-13, including imports in excess of 80 million tonnes. While the domestic price of the fuel ranges between R2,200 and R2,500 a tonne, import prices are roughly 50% higher. Still, pooling would result in an increase of R100 a tonne only because imported coal is generally more efficient with higher calorific value.

Sources said that the coal ministry has proposed the limited application policy for price pooling in a note forwarded to the Cabinet Committee on Economic Affairs (CCEA). The CCEA had earlier asked the coal and power ministries to finalise a workable formula on pooling before it can decide on the issue.

Under the revised terms of the fuel supply agreement (FSA) finalised by Coal India, it will supply 80% of the annual contracted quantity of coal to power producers. Out of this, 65% of the coal will be provided from domestic sources and the balance 15% coal would be met through imports. CCEA expects that pooling of coal prices would be required in 2013-14 and 2014-15 in view of CIL's inability to meet even 80% of the annual contracted quantity of coal for new generating units commissioned from April 1, 2009, to March 31, 2015.

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