The power ministry has told an inter-ministerial panel that the proposed regulator for the coal sector should be equipped with adequate powers to decide upon the prices of the fuel to curb the “profiteering” tendencies of coal companies. It should also be empowered to adjudicate disputes between coal producers and buyers.
Ahead of the next meeting of the Group of Ministers constituted to suggest the powers and functions of the proposed regulator, the ministry contended that while power purchase agreements are regulated by the concerned electricity regulatory commissions, coal companies are not.
The ministry argued that some of the practices presently adopted by Coal India Ltd are completely tilted in favour of coal firms such as incentive structure and the clauses in fuel supply agreements. Alleging that CIL is unevenly supplying coal to various thermal power plants, the ministry contended that in the absence of FSAs, the fuel is being supplied through the MoU route where there is no penalty clause for short supply.
“In the present scenario of scarcity of coal, the coal regulator should have powers to place restrictions on profiteering by monopolistic coal companies. It would go a long way in regulating coal prices and ensure benefits to the consumers too” the ministry said in a recent note.
It indicated to the PMO that CIL was defying its directive issued at a meeting on February 1 that FSAs will have to be signed for all plants commissioned since April 2009.
The ministry suggested that the proposed regulator should be also empowered to adjudicate disputes arising out of breach of FSAs. “Such an arrangement is necessary in a monopoly situation where coal production is completely controlled by CIL,” according to the note.