Price pooling of coal spiked by CCEA

AThe Prime Minister's Office had earlier directed CIL and Central Electricity Authority (CEA) to work on pooling coal prices. PTI photo

The government today buried a proposal to pool prices of imported and domestic coal to make the commodity affordable to new power plants, owing to sharp opposition to the scheme.

"Price pooling is out of the window," a source attending the Cabinet Committee on Economic Affairs on the issue said here.

While no formal reason was given for burying the proposal, the source said power projects commissioned before 2009 will continue to get coal at pre-fixed (below market) rates.

New projects commissioned after 2009 largely have a cost-plus mechanism for calculation of electricity tariff and so any higher imported cost of coal will be passed through to the consumers, he said.

Private power producers wanted the sub-market domestic coal prices to be averaged out with international price of imported coal so as to have a uniform fuel price and remove the disadvantage new projects faced as compared to older ones.

The pooling was being opposed for various reasons by older power plants and domestic coal producers.

"For the remaining 24,000 MW projects it is work in progress...remaining being which have tariff based linkages, which have no PPAs or which have tapering linkages," the source said.

The committee, which was looking into the issue, will come back to CCEA (Cabinet Committee of Economic Affairs), he added.

The power projects commissioned before 2009 aggregating a capacity of 65,185 MW will get coal at domestic prices, whereas post 2009 projects, with a capacity of 36,000 MW, which have signed Power Purchase Agreements (PPAs) with the procurers will get the dry fuel at cost plus basis.

Cost plus basis is the total cost at which the imported coal will be supplied to the power generation companies including the additional charges as well as transportation.

This mechanism may lead to increase in electricity tariffs if the generation companies passes the rise in cost to the consumers.

... contd.

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