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Pool pricing of imported, domestic coal in India to be delayed

30th January 2013

By: Ajoy K Das

Creamer Media Correspondent

  

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KOLKATA (miningweekly.com) - The Indian Coal Ministry’s development of a pool price mechanism for domestic and imported coal was facing opposition from several provincial governments.

According to an official in the Ministry, concluding a pool price mechanism would be delayed since coal reserve-bearing provinces like West Bengal, Orissa and Jharkhand have opposed pegging a combined price for domestic and imported coal on the grounds that this would disadvantage pit-head-based power generating plants in these provinces, which would have to pay a higher premium for coal feedstock.

The argument made by these provincial governments to electricity regulator the Central Electricity Authority was that pit-head-based power plants would lose their geographical advantage if they were forced to pay a higher pooled price even though the plants would have access to coal in close proximity.

In fact, these power plants would indirectly be subsidising other thermal power plants in the country, which were entirely dependent on imported coal as feedstock, the official said.

The pool price mechanism would be implemented on the basis of the weighted average of domestic and imported coal blended for thermal power plants. However, since the imported coal price was based on gross calorific value (GCV), as per international trading practice, and Indian domestic coal pricing was based on useful heat value (UHV), it could be assumed that a combined price would be higher than current domestic prices paid by thermal power plants.

Though Coal India Limited (CIL), the largest miner, accounting for over 80% of domestic supplies, does not need government approval in revising prices, as was the case with most other fossil fuels, energy price revision was a politically sensitive issue, particularly at a time when the Reserve Bank of India maintained that inflation pressures persisted in the economy.

Last week, the CIL board refrained from discussing coal price revision.

With the government missing a deadline for setting up a coal sector regulator with the authority to revise prices and provinces opposing a pool price mechanism, finalising a framework for the coal price which factored in higher imports would be further delayed, officials said.

Edited by Esmarie Iannucci
Creamer Media Senior Deputy Editor: Australasia

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