KOLKATA (miningweekly.com) - India’s largest power producer NTPC has joined provincial governments in opposing the federal government’s proposal for a pooled price mechanism for imported and domestic coal.

NTPC has opposed the pooled price mechanism on the grounds that it was unreasonable to expect it to pay more for coal for thermal power plants and, in effect, cross-subsidize private power-producing companies entirely dependent on imported coal.

The government-controlled NTPC further pointed out that a weighted average price for imported and domestic coal would result in the coal price increasing by an average $3/t to $5/t and it would pay more for raw material when power distribution companies controlled by provincial governments were not allowed to pass on matching higher electricity tariffs to consumer.

Meanwhile, the provincial governments of West Bengal, Andhra Pradesh and Uttar Pradesh have opposed the pooled price mechanism on the grounds that a uniform higher price of coal, imported and domestic, would nullify the locational advantage of pithead thermal power plants in these provinces at the cost of promoting private sector power plants in other regions sourcing their entire feedstock through imports.

The Coal and Power Ministries had approved a pooled price mechanism, but putting this into play had been postponed following opposition from various stakeholders like NTPC and provincial governments.

The lack of consensus on the issue has forced the pooled price proposal to be put before the Cabinet Committee for Economic Affairs, which would consider it at a meeting next month.

Significantly, Coal India Limited (CIL), which accounts for around 80% of domestic coal supply, has communicated to the Coal Ministry its reluctance to take on any price risk on its balance sheet stemming from sourcing coal from international markets.

Moreover, implementing a pooled price would throw open legal risk to CIL from consumers with which the miner had long-term supply contracts.

Sensing opposition to a pooled price for coal building up across stakeholders, and upward revision of electricity tariffs being politically sensitive, with India heading for elections next year, the Coal Ministry had suggested the alternative of implementing the pooled price on an experimental basis for two years without electricity tariff revision during such a period.