Prodded by the board of directors, Coal India will soon write to its consumers seeking their consent to pool the price of imported coal with the domestic product. According to sources, the pooling proposal was mooted as part of CIL’s effort to fulfil its supply commitment to power plants commissioned after March 2009.
Viable model
As suggested by the CIL board, the exercise will be taken up in consultation with the Central Electricity Authority, which earlier claimed to have secured the consent of power utilities.
The board, at its meeting on August 31, questioned the feasibility of price-pooling and asked the company management to submit a viable ‘business model’. The board, however, did give its consent for CIL to distribute the imported coal on a ‘cost-plus’ basis.
Proposed by the Union Government, price-pooling would largely help the new coastal power plants, mostly in the private sector, to get imported coal at a subsidised price. The subsidy on imported coal should be recovered through an increase in the prices of domestic coal, mostly consumed by Central and State government-owned utilities. According to sources, the August 31 decision is perfectly in line with the decisions taken at the August 7 board meet, which agreed on pooled prices, provided the company managed to get consent from each and every consumer.
VALID consent
Since the fuel supply pacts in operation have no provision for price-pooling, the existing set of buyers may refuse to subsidise new consumers, thereby forcing CIL to absorb the loss. However, as on August 31, CIL failed to provide any valid consent from its consumers as both the Coal and Power Ministries were pushing each other to make the first move.
“In its decision on August 31 the board therefore made both the parties responsible for substantiating their claims for a pooled price,” a source said.
“With a couple of State governments, including West Bengal, already opposing the price-pooling proposal, the board doesn’t want to take any chance with CIL’s finances,” he added.