The cabinetcommittee on economic affairs is likely to take stock later this month of itsdecision to allow the pooling of coal prices after several ministries and stategovernments opposed the move, which may raise power tariff by up to 15 paise aunit for all.
Thegovernment may now try to find a middle path on price pooling, which involvescombining the rates of imported and domestic coal.
Aninter-ministry note circulated ahead of a meeting of a group of ministers thisweek gives the option of a pass-through mechanism for power plants usingimported coal. This will increase the generation cost by 30-50 paise of unitsopting for the pass-through mechanism compared with a hike of 13-15 paise forall units if price pooling is done. The cabinet will form its views based onthe outcome of the meeting of the ministers.
According tothe note, the power ministry should work on guidelines to help regulators todevelop a pass-through mechanism for imported coal, which will form part of thefuel supply agreements signed by new large power plants.
Apass-through mechanism means the price charged from electricity distributioncompanies will absorb the rising cost instead of being cross-subsidized bypooling or absorbed by the power generating company.
Most states,including Bengal and Odisha, are opposing price pooling of coal supplied tothem by state-run Coal India Ltd with the imported variety that will be broughtin for new power plants being set up by big entities such as Reliance, theTatas and the Adanis.
The newinitiative will enable private entrepreneurs setting up power plants of7,000-8,000MW capacity to get a better price for their electricity.
Theestimated rise in tariff by 30-50 paise a unit will affect only those stateswhich buy from these big plants.
Theadditional cost on account of imports will have to be absorbed by powerdistributors till Coal India is able to ensure higher domestic production whichwill bridge the gap between demand and supply.
Coal India saidit can guarantee the supply of 80 per cent of the coal needed by new powerplants, with 65 per cent coming from domestic output and 15 per cent fromimports. However, since imported coal can come at different prices, theregulator is being asked to fix benchmark prices for the coal at regularintervals.
Officialswho developed the pass-through option argue that this formula will only impactthe tariff of those electricity plants which have already signed power purchasedeals through a competitive bidding process.
However, ifprice pooling is implemented, electricity prices for all producers will go up,adding to the burden of end-users.
Also, state-run electricity generator NTPC has voiced its objections to price pooling.
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