Govt to pool coal supplies, pass on higher cost of imports

After disposing of the proposal to pool prices of domestic and imported coal, which might have made the fuel affordable to new power plants, the government will now pool supplies and pass higher import costs on to tariff, the Planning Commission said on Thursday.

". . .pooled pricing (of coal) is not being considered. What we are doing is pooling supply," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters in New Delhi at a Federation of Indian Chambers of Commerce and Industry event.

"The domestic coal would be cheaper and the imported coal will be more expensive. . .when you are getting coal (supply) in two different ways and at two different prices, the higher cost of imported coal will passed on in the tariff," he added.

Last month, the Cabinet Committee on Economic Affairs had buried the proposal to pool prices of imported and domestic coal owing to sharp opposition to the scheme.

The sources had said: "Price pooling is out of the window and power projects commissioned before 2009 will continue to get coal at pre-fixed (below market) rates."

Ahluwalia said: "It is true that we are not considering a system where people will get coal and it would be at some kind of average price.

"What is going to happen is that the available domestic coal, which is priced lower, will be distributed among different people and the balance (shortfall) will have to be made up through imports."

New projects commissioned after 2009 largely have a cost-plus mechanism for calculation of electricity tariff and so any higher imported cost of coal will be passed through to the consumers, the source had said.

Private power producers wanted the sub-market domestic coal prices to be averaged out with international price of imported coal so as to have a uniform fuel price and remove the disadvantage new projects faced as compared to older ones.

The pooling was being opposed for various reasons by older power plants and domestic coal producers.

Meanwhile, on the setting up of India Inclusive Innovation fund of $1 billion, he said, "It is very much on the cards and going through various normal approval procedures. I do think that it is very important initiative."

Asked about his expectation from the Reserve Bank's annual monetary policy for the current fiscal, he said, "I am looking forward to it. I think it is much better economic situation than it was three months ago. Let's see what RBI does."

Image: Deputy Chairman of Planning Commission Montek Singh Ahluwalia speaks during a news conference in New Delhi | Photograph: B Mathur/File/Reuters