The government has speeded its plan for an independent regulator for the coal sector and to allow private entry into coal mining.

“A Bill will be made soon for setting up a coal regulator. Also, the Bill to allow private players to mine coal might be re-introduced in the next session of Parliament. It should happen in 4-6 months. But if Parliament sends the Bills to the standing committee, it might take longer,” coal minister Sriprakash Jaiswal told Business Standard.

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Currently, public sector Coal India Ltd (CIL) enjoys monopoly over production and sale of the dry fuel. Private companies are only allowed to mine for their captive consumption.

Independent regulation of the coal sector is considered important to ensure e-auction remains competitive, fix formulae for price revision for long-term fuel supply agreements, fix trading margins and improve allocation of the available reserves. While there has been a decline in the quantum of coal sold through e-auction - a majority of which is supplied by CIL - the prices realised are 20-30 per cent higer than the notified price.

A regulator would mean an end of the monopoly of CIL to fix and revise prices in the domestic market. The Integrated Energy Policy (IEP) recommends “annual” price fixation of the dry fuel as one of the roles of the proposed regulator based on the e-auction price of coal, Free on Board (FOB) price of imported coal and the production cost.

The IEP considers CIL’s virtual monopoly in supply as one impediment to determining prices in a competitive market. It says: “Annual revision of coal prices would create some uncertainty, but no greater than at present, where Coal India periodically revises coal prices.”

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