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Coal price pooling plan revived - Under proposal, CIL will buy imported coal and blend it with its own stock; state electricity boards are not to keen on such a deal

  • The government will once again consider the proposal to pool the prices of imported and domestic coal for power plants commissioned after 2009. The issue is likely to be taken up by the cabinet later this month. These plants had either not been given coal links or were given blocks on which mining was yet to start in the absence of forest and environment clearances. Coal links mean either a plant is allotted a block ready to mine or has a pact with Coal India for supplies. The power ministry feels projects worth over Rs 1 lakh crore can take off if the government agrees to pooling. About half of these plants are privately owned and the rest with PSUs, primarily NTPC. Under the pooling proposal, Coal India will buy imported coal and blend it with its own stock.

  • The coal will be costlier than the domestic fuel, raising the power tariff by 75 paise in the remaining months of this fiscal. Subsequently, the tariff hike will be 45-50 paise in 2015-16 and 5-10 paise in 2016-17, according to coal ministry officials. Officials said the finance ministry wanted supplies under this arrangement to be limited to plants that have signed power purchase agreements with state electricity boards on a cost-plus basis.

  • Not too many state electricity boards are keen on such a deal. So, the coal and power ministries want the difference between power generated using only domestic coal and that using a mix of imported and local fuel to be paid as subsidy to the electricity boards in a bid to get them agree to price pooling. A similar plan floated last year by the UPA government to pool the prices of all coal supplied to power plants was also opposed by the electricity boards.

  • Most states, including Bengal and Odisha, had objected to the plan to pool the price of coal supplied to them under long-term agreements with Coal India Ltd. They argued that their operational cost would rise if the price of imported coal is factored in even as new plants set up by big business houses would benefit. Analysts point out that the weighted average price for imported and domestic coal would increase prices by an average $3-$5 per tonne. NTPC had earlier objected to this plan as it could impact its finances but is now believed to have accepted the proposal.

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