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To meet shortfall in domestic coal supplies, Coal India Ltd may need to import nearly 15 million tonnes in 2013-14. This follows the Government decision on Monday that allowed the miner to fill the gap between domestic supplies and annual contracted quantity to power stations by imports.
The exact volumes to be imported would depend on demand from power stations, which is reviewed every quarter.
“Since the Government has also kept the window open for power companies to import by themselves, Coal India would seek their view,” said S. Narsing Rao, Chairman and Managing Director, Coal India.
Rao said the company would appoint a Government agency to import on its behalf in the current financial year.
“May be from next year, we may look at importing ourselves,” he added.
After 2009, Coal India has 61 new fuel supply agreements (FSA) that account for 24,300 MW, for which it will have to import coal to meet the gap in supply.
The miner would need additional 89 million tonnes to feed these power plants. This is excluding nearly 14,500 MW of projects run by NTPC and its joint ventures, which are also in queue to seal supply pacts.
Coal India, in the FSA, said it would supply 80 per cent of a power plant’s requirement. Of this, 65 per cent would be from its mines and the balance imported.
Industry observers are of the opinion that opting for cost-plus pricing (means landed price of imported coal plus transportation charges and local levies) for coal supply to power utilities is a transparent way of addressing fuel supply issues, instead of pool pricing.
However, the increase in electricity rates in line with higher cost of imported fuel would have to be seen.
Cross-subsidy
“Question remains whether power tariff increase could be a politically accepted move, especially with the elections slated for 2014,” said Amol Kotwal, Deputy Director, Energy and Power Systems Practice, Frost & Sullivan.
The price pooling mechanism, on the other hand, would not only create an element of cross subsidy but also makes the physical allocation of imported coal more challenging than just the weighted average price determination.
“The cost plus mechanism is simple, transparent and fair at large since the coal consumers pay for the imported coal that is physically delivered to them,” said Dipesh Dipu, Partner at Hyderabad-based Jenissi Management Consultants.
Under price pooling the average of imported and domestic coal price will be charged from the buyer. This would result in higher coal price.
In addition, the cost-plus mechanism also provides incentive for keeping a close watch on imported coal bills at power project levels, while price pooling could lead to greater consumption of imported coal since the costs could be spread across projects, said Dipu.
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