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POV : Should the prices of imported and domestic coal be pooled?

By , ,
Industry : Coal

The under pricing of domestic coal compared to expensive imported coal has made power developers not so keen on importing the dry fuel to meet their requirements. This has adversely affected the Indian power utilities. The government has proposed to formulate a mechanism to pool the prices of the imported and domestic coal to ensure a uniform rate of coal across the country. The suggestion, however, has found very few takers in the industry.

InfralineEnergy spoke to the following experts to find out their reaction.

Shri H K Vaidya,CGM,Coal India Limited

While, theoretically, pooling of coal prices is a good idea, but in the practical world, it would not work. This mechanism would only result in making the imported coal cheaper and increasing the price of domestic coal. Also, given the fact that imported coal is of a better quality, this would only magnify the clamour for imported coal at the cost of domestic coal. All this would greatly affect the demand for domestic coal. Those developers whose plants are closer to the ports will argue against the transportation of the coal to plants situated elsewhere, which would result in plants with vicinity to the port enjoying good quality of cheaper imported coal subsidised at the cost of other plants that are not located close to the port.

The suggestion that it would bring the price down is a wrongful concept. Again, if the environmental clearances are not forthcoming, this would result in production going down and leading to prices soaring. With the expenditure remaining the same and the overheads increasing, the developers will have to compensate that. I would again like to repeat that though different people might have different opinion on this subject, but ultimately, this is not going to be a practical workable solution.

NA,NA,CEA

Central Electricity Authority is in favour of the mechanism, however, Coal India Ltd. is not in favour of the idea as expressed to us in a meeting. The way to do it, is mixing the price of domestic coal with imported and then selling it at an arrived price. This would not affect the individual price of either the domestic or the imported coal.

Coal India Ltd.'s inability to meet the coal requirement of the industry is the cause of increasing the need for imports. Importing expensive coal has become a necessity given the increasing shortage. Since no one else is allowed to sell the coal, Coal India is dictating the industry. On one side, we are getting the domestic coal from WCL to Gujarat and in another case, Gujarat's ports are importing coal for UP and Punjab, which unnecessarily is making the railway network busy.

NA,NA,NTPC

NTPC started importing coal since 2005-06. Depending on the quantum of shortage of domestic coal, NTPC stations are blending imported coal in the range of 10-15 percent with domestic coal. This should be done by all consumers. It will help conserve domestic coal as well as boiler's acceptability of such blending. . Consequently, such pool price is not practical and it will further increase coal price.

The price of power is sensitive and there should be off-take as well. It is seen that there is no taker of power with higher RLNG. With 80 percent domestic and 20 percent RLNG mix, the power price will be effective and machine capacity will be utilised fully. As coal scarcity is a national problem, the Ministry of Coal must take a decision to make it mandatory for the utility to use import of coal at the rate of 10-15 percent of their coal requirement. Each and every utility should bear the burden of the imported coal.

(Infraline introduces "Points of View" as an initiative for encouraging dialogue between various stakeholders of the Indian energy sector on contemporary subjects. If you wish to participate in such initiative, please write to feedback@infraline.com)