The power ministry has told the Planning Commission that the proposed system of coal banking should not lead to profiteering among the coal block holders. The ministry has also called for the setting up of an empowered committee to decide on the transfer prices of surplus coal from one project to another.
The Commission is actively exploring the possibility of introducing the system of coal banking. A proposal to this effect was presented to the Plan panel by the Association of Power Producers (APP), a representative body of private power developers.
The APP proposal recommends that Coal India should act as a banker to store the surplus produce from at least 25 captive mines and return the fuel to the block holders once their projects go on stream.
Coal India, however, has refused to be a party to the proposed mechanism saying it cannot give assurances on returning the fuel given the growing demand for it.
After Coal India’s refusal, the Commission has decided to allow cashless transfer of coal from one project to another for a maximum period of three years, and its equivalent return subsequently.
But the power ministry has cautioned that the block holder supplying coal should not unduly financially benefit from the banking process.
“There needs to be a balance between the need to appropriately incentivise surplus coal and the need to prevent undue enrichment. The transfer price of surplus coal should be decided by an empowered committee of the coal ministry,” the power ministry wrote in a letter to the Commission on November 18.
The BK Chaturvedi committee on coal banking has finalised its report and would likely submit it next week.
The power ministry argued that the captive block owners cannot be allowed to operate under this dispensation for a long period as it would defeat the basic objective of allocating a block for an end-use project.
The ministry also said that wherever a captive block renders surplus coal for longer period, the government must re-assess whether the allottee deserves the block or not. Even the transfer of coal from one project to another should be executed under well-defined government guidelines.
The ministry’s views come amid the coal ministry trying to seek the Union Cabinet’s approval for its Surplus Coal Policy which envisages that any surplus produce from the captive mines would have to go to Coal India at a government-determined price.
The power ministry too has argued in favour of surplus coal finding