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Coal India likely to go for price-pooling mechanism of imported coal

03 Jul 2012 Evaluate

Coal India (CIL) is likely to go for the price-pooling mechanism, where the average price of coal sold by the company will be increased to accommodate use of imported coal. It is also expected to sort out the issues involved with Central Electricity Authority, Central Electricity Regulatory Commission, Coal Ministry, Power Ministry and State Utilities in a meeting, which is scheduled to be held in the second week of July.

This is an important step as private producers have been demanding it for sometime now, with price-pooling being recently proposed by the prime minister's office (PMO). With the country lined up to witness a shortfall in supply in the next few years, CIL alone cannot meet the coal demand from power producers. The deficit in supply has to be met via imports, which normally costs more than double the price at which coal is imported.

Imported coal increases the cost of generation of power and as a result the producer have been demanding a price pooling mechanism where the average price of coal sold through Coal India will be increased to accommodate the use of imported coal. The concept has been tabled and it will have to be discussed and debated to arrive at the mechanism and the method of calculation of the pool price.

CIL's coal with gross calorific value (GCV) of 4,000 is about 1,100 per tonne and imported coal with GCV between 5,000 and 8,000 will be of higher price. Whereas, CIL will be supplying about 350 million tonnes to the power producers another 70 million tonnes may be required for imports.       

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