Coal India Ltd may suffer losses to the tune of Rs 3,000 crore, if it implements the proposal for pool pricing mooted by Central Electricity Authority.
Coal India plans to import around 20 million tonnes of coal in 2012-13.
Spread over the next 20 years, even at the current levels of imports and the sale prices, the anticipated losses to Coal India will come to nearly Rs 60,000 crore, sources say.
This observation has been made by the independent directors of the company. While giving their note of dissent before the Board of Coal India, they said that the company should not agree to CEA proposal, which would result in supplying subsidised imported coal to power companies, which is not legal.
The independent directors also wanted their views to be communicated to the Coal Ministry.
Coal India has always maintained that it will implement pool pricing only if all stakeholders agree to it.
“The company will not take the burden of even a single rupee on its own balance-sheet. These are parts of discussions and nothing is final. We would write to customers seeking their view also. We are yet to come to any conclusion,” Coal India Chairman and Managing Director S. Narsing Rao told Business Line .
Rao has informed its board members that due to pool pricing, Coal India will not incur any additional cost and it is only revenue neutral. Coal India would charge two per cent of the landed price of imported coal as ‘service charge’ including applicable taxes and levies from power utilities that are receiving the imported coal. Pool price would come into force if all power utilities agree to the proposal.
CEA has proposed blending up to 20 per cent of the committed coal quantity with imports.
This will moderate the sale price of the fuel for both private and public power producers.
According to the New Coal Distribution Policy (NCDP), Coal India may adjust its overall price when coal is imported to meet the domestic requirement. This means the prices of coal can be increased or decreased depending on cost of imported coal.
However, it does not authorise ‘under-selling’ of imported coal at half the cost.
Independent directors say that Coal India must have a legislative sanction, in case it gives subsidy on coal private to power producers. A mere executive guideline (NCDP) cannot substitute for law.
An attempt was made by CEA to cover up the issue of subsidy by saying that the losses incurred through selling imported coal at half the cost may be made good by increasing the price of indigenous coal by around Rs 100 per tonne for all power producers.
But, independent directors feel that this is a thin cover as CEA itself provides for passing through of the increased price of coal to the electricity consumers.
“Ultimately, the cost of increase in prices is to be borne by the domestic consumers of power, while the independent power producers will get imported subsidised coal at half the cost,” sources said.
They feel that whenever coal is imported; it should be at ‘cost plus price and at the port of landing.’
This means the buyer will have to bear the charges of duty, freight and octroi in addition to cost of the coal.