Failing to level out inter-ministerial differences, the Government on April 22 turned down the proposal of coal price pooling by which prices of domestic and imported coal are averaged to make the fuel affordable to new power plants. The proposal was being opposed for various reasons by older power plants and domestic coal producers. The Cabinet Committee on Economic Affairs (CCEA) has passed the decision on the coal-price pooling mechanism to a group of ministers (GoM) panel scheduled to be held this week headed by either Finance minister P Chidambaram or Agriculture minister Sharad Pawar.
Private power producers favored the proposal to get a uniform fuel price to remove the disadvantage that new power projects faced as compared to older ones. As per the Cabinet Committee on Economic Affairs (CCEA) meeting, the power projects commissioned before 2009 will continue to get coal at pre-fixed (below market) rates. While, the new projects, commissioned after 2009 largely have a cost-plus mechanism for calculation of electricity tariff and so any higher imported cost of coal will be passed through to the consumers. This may lead to increase in electricity tariffs if the generation companies pass the rise in cost to the consumers.
However, the decision has been pending for a long time because of the conflict between the coal and power ministries on how the impact of higher imported coal prices will be shared between state miner Coal India (CIL) and power companies. Earlier, in February, CCEA had given its in-principle approval for coal price pooling and had asked coal and power ministries to work out a formula. Various thermal power plants in the country have been stranded due to scarcity of coal and the decision on coal price pooling will help these plants.
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