Chawla committee for creation of national coal market

A committee on natural resources allocation has called for the creation of a national coal market to ensure greater transparency in the allocation of the dry fuel and reduce the demand-supply mismatch.

Pointing out the pitfalls of the existing allocation mechanism for the dry fuel, the committee headed by former Finance Secretary Ashok Chawla recommended establishing a national coal market by creating a platform for commercial trading of coal by suppliers and buyers.

"If more transparent and efficient allocation is the ultimate goal, then these principles (captive mining and e-auctions) be expanded by moving to a national coal market," the committee recommended.

One possible mechanism is to build on the experience gained through the e-auction platform to create a common one for all buyers and suppliers, including the captive allotees that are permitted to sell.

Stating that the introduction of both captive mining and e-auctions were steps in the right direction for moving toward market-based allocation, the committee, however, said these were still relatively small in magnitude.

"While the platform can initially be over-the-counter (OTC) in its nature, it would be mandatory for all sales in coal by the permitted entities to be registered with the platform and pay a standard fee, with details of price and mature of contract and grade of coal transacted," it said.

This would permit a gradual evolution of established prices and terms of contract. The platform would ensure lower prices of the fossil fuel, since competition from imported coal would always act as an overall check, the committee said.

"The current mismatch between supply and demand of coal in India can partially be attributed to lack of sufficient interfaces between consumers and producers," it said.

The operation of the platform, which would be owned by Coal India and register all approved users, could be regulated by the proposed coal regulator.

"Even with a coal market, the rationale for a coal regulator may remain, since CIL would be, at least for some time to come, a disproportionately large player in the market," it said.