Coal Min to approach Cabinet on price pooling

Dec 17 2012, 04:04 IST
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Summary* Centre, states talks on coal pricing end in deadlock

With talks between the government and coal-rich states ending in a deadlock over the issue of pooling prices of domestic and imported coal, the coal ministry has decided to approach the Union Cabinet to resolve the matter.

A senior government official said talks on November 22 ended in a deadlock as the states argued that besides jacking up power prices it would also burden their exchequers.

West Bengal, in particular, has been a harsh critic of the proposed pooling mechanism. Orissa and Jharkhand have also opposed the move.

The opposition by these states come amid reservations expressed by Coal India Limited’s independent directors, who have argued that it would bleed CIL’s exchequer dry by Rs 60,000 crore in the next 20 years.

The Prime Minister’s Office, which has asked the coal ministry to approach the Union Cabinet on November 30 has also asked the power ministry to furnish inputs for a Cabinet note to help expedite its formulation. The PMO has instructed that the note should highlight in detail the pros and cons of adopting the price pooling method.

Besides, the states, ministries like Railways have also opposed the proposal. Coal-rich states primary contend that while such a mechanism would be ideal for power plants located in coastal areas, those located in the hinterlands or near the pitheads may not benefit from it.

They have told the CEA and the coal ministry that if implemented, the decision could jack up the average domestic coal prices by Rs 100 a tonne while a power consumer may have to shell out 10-12 paise more a unit, triggering a cascading effect on the prices of most goods.

These state governments are of the view that the move may also trigger a political backlash in their home turfs once tariffs are raised to mitigate the pooling costs.

CIL is also understood to be upset with CEA’s role in the entire exercise as any agreement for coal supply is executed between the buyer and the seller. Moreover, the existing supply contracts reportedly have no mention of any pooling system.

Power play

* States argued that besides jacking up power prices the price pooling mechanism would also burden their exchequers

* West Bengal, in particular, has been a harsh critic of the proposed mechanism while Orissa, Jharkhand have also opposed the move

* Without a coal regulator, the Centre has decided to rely on a pooling mechanism drafted by coal and

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