Power generating companies presently require an estimated 300 million tonnes annually while Coal India can supply 65% of this need. The former are demanding that imported coal be made available at a subsidized price, but will they provide power at a ‘cheap’ rate?
The ‘power’ struggle between coal and power ministry officials may come to an end soon when the revised Fuel Supply Agreements (FSAs) are signed by all the concerned parties. The new or improved versions of the FSAs are likely to be signed by the middle of next month, according to information available in the media.
The major problem that still remains as a stumbling block is the issue of agreement over pooling of prices of imported coal as the independent directors of Coal India feel that the miner would incur losses of some Rs3,000 crore by implementing the proposal for pool pricing. This is not ‘correct’ as per the Central Electricity Authority!
There is therefore the urgent need to overcome this impasse as import of coal will have to continue for a long time to come since the demand is rising and the indigenous producer is unable to mine enough of coal as many of the allocated coal blocks have made little or no progress.
What can India do to augment coal supplies? Read here
The Inter-Ministerial Group will continue its work starting sometime next week on the coal de-allocation process! In fact, it is well-known that obtaining of both state and MOEF (ministry of environment & forest) clearances have been a nightmare and despite the out-of-turn coal block allocation years ago, only one has been operating, with all others stuck up for clearances.
Imports, necessitated by shortfall in indigenous supply, have been the order of the day. And, under the FSAs, 80% supplies are ‘guaranteed’ under penalty clauses but failure to supply may adversely affect the final supplies to power producers who envisage a production of 60,000 MW. It remains to be seen how the FSAs really work and one can only hope that this the paper guarantee works.
The power generating companies, at the moment, require an estimated 300 million tonnes annually and Coal India can supply 65% of this need. So, to meet the full requirement of the needs of power companies alone, a little more than 100 million tonnes of coal will have to be imported by Coal India. In reality, it may be more than this.
In the overall picture, during the current Plan Period, 2012-17, annually there will be an estimated import requirement of 200 million tonnes per year, about half of which will have to be allocated for power generating companies. And these companies are demanding that this shortfall be met by imports alone and be made available at the subsidized price! By the same token, are these companies willing to make available ‘power’ at a ‘cheap’ price to the aam aadmi? Good question, but no answer!
Adding fuel to fire, there is a growing demand by some of the coal producing states, such as Chhattisgarh, Jharkhand and Odisha that by having coal blocks located in their states, they ‘need’ to get electricity at concessional rates!
The Central Electricity Regulatory Commission (CERC) is not in favour of such a demand being met. Such a demand, if ever met, will have far-reaching implications on the economy and cannot and should not be entertained.
As far as the issue of pooling of prices of imported coal is concerned, why not base the price on the actual quantity of imported coal being supplied at a given time? Or, as a thumb rule, why not supply the coal on the same ratio as the indigenous to imported coal, on a quarterly actuals basis? The only limiting factor may be the calorific value/content of coal supplied in arriving at the price factor.
Such a proposal, which can be worked out in detail by technocrats, may be found acceptable and equitable to one and all?
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has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at firstname.lastname@example.org