The Union Government’s move to ask existing domestic coal users to pay for imported fuel to be used in the newly commissioned power projects, may face stiff opposition from coal-bearing States.

The proposal has already been criticised by a section of directors on the board of Coal India Ltd.

According to sources, at least three major coal producing States, West Bengal, Jharkhand and Odisha either did not join the recent meeting organised by the Central Electricity Authority (CEA) or opposed the proposal, which asked CIL to pool the price of imported coal with domestic produce.

CEA was asked by the Prime Minister’s Office to discuss the issue with stakeholders. The Union Ministries of Coal and Railways skipped the meeting held in July. The Railways is arguably the single largest user of electricity at approximately 15 billion units a year.

Senior officials of the West Bengal Government told Business Line that the decision, if implemented, will help only coastal power plants and was a disincentive for coal bearing States in particular, as the average cost of domestic fuel would increase by Rs 100 a tonne.

Available estimates suggest that electricity tariff to the end-consumer may move up by 10 paise a unit leaving a cascading effect on cost of all goods and services.

“From West Bengal only one user, West Bengal Power Development Corporation joined the CEA meeting. The minutes of the meeting wrongly quoted the represented to have agreed to the pooling proposal. WBPDCL has already shot off a rejoinder on the issue,” a senior power department official said.

Sources suggest that the West Bengal Government is keeping in touch with other coal bearing States for opposing the move.

“No coal bearing State should agree to such a frivolous proposal. And, it would face stiff opposition both legally as well as politically as and when we are formally communicated,” a senior State bureaucrat said.

According to him, the existing fusers of domestic coal are in contract with Coal India on domestic source of coal and its price. It has no provision for price pooling or imports. Naturally, any unilateral move on the part of CIL may be challenged.

Procedural issues

State officials have also questioned the CEA’s authority in deciding on issues related to pricing.

“Any such discussion should take place between the coal company and the buyer. Sadly, no such thing has happened as yet,” the official said.

“Moreover, we are of the opinion that converting CIL into a deemed canalising agency should require Cabinet approval,” the source added.

The CIL board is set to discuss the price pooling proposal again next week.

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