CCEA may okay coal price pooling this week

The CCEA had in February dumped the controversial proposal of price pooling of coal following widespread opposition from states.

The government is slated to approve the reworked proposal of coal price pooling at the next meeting of the Cabinet Committee on Economic Affairs (CCEA), which is likely on Friday.

“We have submitted a note on the mechanism, but the final call will be taken by the CCEA in its next meeting,” coal minister Sriprakash Jaiswal said in Kolkata on Wednesday.

The CCEA had in February dumped the controversial proposal of price pooling of coal following widespread opposition from states.

This time, however, the proposal of price pooling has been revived in the form of ‘pass-through mechanism’ by the power ministry.

The proposal of price pooling, essentially a process of averaging of prices of domestic and imported coal to implement a uniform price for power producers, was earlier approved by the Cabinet in February, albeit with a directive that the coal and power ministries come back with details of the process.

Then, in April, the CCEA shelved the plan following failure to reach consensus on its likely impact on power tariff.

Several states, mostly coal-bearing ones, including Orissa and West Bengal, had objected to the concept saying averaging high prices of imported coal with cheaper notified domestic prices would only benefit the new private sector coal plants at the cost of older state-owned power producers which have coal linkages.

Following this, the price-pooling proposal got reworked during meetings between the coal and the power ministries and also at the intervention of the Prime Minister’s Office.

Under the proposed new pass-through mechanism, entire additional cost of imports would be passed on to the consumers against averaging of prices of imported and domestic coal under the earlier price-pooling mechanism.

Any model that gets the government approval is likely to have little impact on Coal India’s financials.

First, Coal India chairman Narsing Rao has already indicated that the mechanism would be implemented by the Central Electricity Authority and not Coal India.

Second, Coal India, at least in this fiscal, is unlikely to import any coal, as indicated by Rao at a recent analysts’ meet.

-Sourced