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The opposition to price pooling mechanism for coal supplies seems to have caused concern to overseas investors in Indian power sector.
The Centre had mooted the proposal of pooling the price of domestic and imported coal.
The issue came to light when a group of officials from the Government of Singapore Investment Corporation (GIC) had a meeting with the West Bengal Government recently, to represent their case in favour of price pooling. GIC is a sovereign fund of Singapore, having reasonable exposure in Indian power sector.
The objective of the meeting was to impress West Bengal to shift its stance on the issue.
Pooling mechanism
The State Government earlier announced its opposition to the proposal on the ground that it would escalate the fuel cost of the existing power utilities in the State, enjoying domestic coal supplies.
Mooted as part of the initiative to force CIL to meet the coal requirement of the generation facilities commissioned after March 2009, price pooling would largely help the coastal power plants, mostly in private sector, to get imported coal at a subsidised price.
Coal-bearing states
The subsidy on imported coal should be recovered through across-the-board increase in prices of domestic coal, mostly consumed by the existing Union and State Government-owned utilities.
However, the mechanism clearly goes against the interest of the coal-bearing States which enjoy adequate fuel supplies to their power plants located more or less on pit head.
Moreover, none of the power plants which are in trouble due to inadequate domestic supplies are located in West Bengal. Therefore, the State has little reason to support price-pooling.
And, as the CIL board mandated, pooling would not be implemented unless the existing consumers agree to the proposal. But that calls for trouble for the investors in new power generation facilities.
Because, in the absence of cheap coal such facilities should depend on imported coal, leading to high cost of electricity which may not find many buyers.
GIC was, therefore, keen that price pooling is implemented.
To the disappointment of the visitors from Singapore, the Power Minister, Manish Gupta, reiterated the State’s opposition to the proposal.
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