Private power producers have opposed cost plus pricing of coal. They fear that the proposed Coal Regulatory Authority Bill would encourage such regime.
Ashok Khurana, Director-General of Association of Power Producers (APP), has written to Finance Minister P. Chidambaran saying that cost plus pricing is not in alignment with India’s larger policy on energy commodity pricing.
APP is a lobby body for private power producers in the country. The GoM headed by P. Chidambaram is likely to meet on December 18 to deliberate on the new draft for an independent regulatory authority for the sector.
According to APP, the cost plus pricing is redundant where coal blocks are given through auction. In such a scenario, the bidder can make any bid because it will be assured of price that covers all expenses plus reasonable return.
“In our view, the preferred model for coal pricing is market pricing on arms length basis (as in oil and gas production sharing contracts). This policy can also be directly applied for surplus coal from captive mines, which can be either sold to Coal India or to consumers who are looking for more supplies,” Khurana said in his letter to Chidambaran.
The association has claimed that more than 44,000 MW of capacity is likely to be stranded soon because of paucity of coal.