The Central Electricity Authority, the technical advisory arm of the power ministry, is in the process of finalization of the implementation of coal pool pricing.
This will give a price incentive to miner Coal India, which was not in favour of this policy as it was apprehensive of getting the right price for imported coal.
Pool pricing is a common pricing mechanism under which domestic coal is priced much lower than imported fuel.
The pool pricing was arrived at after the Prime Minister's Office asked CEA to build a consensus and make sure that the PSU doesn't get a raw deal. Once pool pricing is implemented and Coal India gets the right remuneration, it can start imports to meet 80 per cent coal supply to power plants.
The Coal India board earlier agreed to supply only up to 65 per cent of the agreed quantity of the fuel to power plants. However, after PMO's intervention, it agreed for supplying 80 per cent. However, that meant it would have to import coal to meet the deficit. Coal India wanted to import the fuel at parity price.
Sources say the CEA has suggested two options in the implementation plan for coal pool pricing. The first was power companies importing coal on their own, the second was importing the fuel as a central agency; the latter was found more feasible.
CEA estimates that domestic production of coal meant for power production will fall short by about 34 million tonnes (mt) in 2012-13.
However, this shortfall can be met by importing only 20 mt of the fuel, as it will be of better quality with a higher calorific value (energy production).
With coal pool pricing and import of coal, Coal India will be able to support 80 per cent coal supply to a power production capacity of about 1.05 lakh MW (half of country's total capacity).
Domestic coal available for power sector is about 347 mt in FY13 and for FY14 it is estimated to be about 381 mt.
With pool pricing, power plants will pay a higher price for coal by Coal India. As per CEA estimates, coal price will go up by at least Rs 105/tonne. Pool pricing of coal will effectively push power tariffs by 2-5 per cent (or 6-7 paisa per unit).
Coal India is likely to discuss the details of pool pricing in the next board meeting.
Under the CEA's implementation plan for coal pool pricing, it has suggested 20 per cent blending of imported coal with domestic coal for coastal plants, which also includes power plants up to 300 km from coast.
For non-coastal, non-pit head power plants, CEA has recommended to blend 15 per cent of imported coal with domestic coal. Pit head power plants with transportation constraints too can blend 15 per cent.
CEA suggested that rest of the power plants need not blend imported coal.
Pricing of imported coal would be based on internationally accepted Gross Calorific Value (GCV) system, which is already implemented by Coal India. As per the CEA plan, the benchmark pricing would be Rs 4,500/tonne for 6,300 Kcal/kg category coal.
Source : profit.ndtv.com