State miner Coal India agreed on Tuesday to pay penalties for failing to provide sufficient supplies to new Indian power projects.
The Coal India board agreed to pay a 1.5 percent penalty if its supplies amount to 65 to 80 percent of the contracted volume and 5 percent if they reach 60 to 65 percent, its chairman told reporters after the board meeting.
Penalties would rise to 10 percent for 55 to 60 percent, 20 percent for 50 to 55 percent and a maximum of 40 percent for supplies of less than 50 percent of contracted volumes.
Board has suggested on pool pricing, which is a common pricing mechanism under which domestic coal is priced much lower than imported fuel.
Sources say the CEA (Central Electricity Authority) 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).
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.
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