NTPC may opt to move out of the price pooling mechanism forimport of coal being run by Coal India (CIL) opening another front in theincreasingly bitter fight between the two companies that could potentially untieIndia's energy security.
The option will be discussed at a meeting between financeminister P. Chidambaram, coal minister Sriprakash Jaiswal and power ministerJyotiraditya Scindia as a set of measures for the mechanism that has been inthe works since November 2011.
A position paper produced by the power ministry for themeeting notes shows that if India's largest power producing company moves outfrom the plan to blend imported coal with domestic production, it will takeaway demand for coal for 22,000 MW of thermal power.
NTPC buys about 36 percent of the total coal produced byCIL annually.
Moving out from the pooling will cut the cost of importedcoal for NTPC, the paper argues and will also give more freedom to the coalmonopoly supplier in the country to price its coal. NTPC and CIL are alreadylocked in another dispute over the quality of coal. The power producer hasclaimed it is paying higher price for inferior quality of coal while CIL hascontested the charge.
A Presidential Directive issued in April 2012 requires CILto meet the demand for coal from all power generation companies with which ithas signed a fuel supply agreement. Since the quantity of coal produced in thecountry at 452 million tons is about 18 percent lower than the annual demand. it has been asked to import the same.
However as the price of imported coal is about three timeshigher than domestic coal, the company will average out the prices to insulateits balance sheet.
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