Govt formulating price pooling mechanism for coal

With a view to mitigate power generation costs in the country, the government is formulating a policy to "pool" international and domestic coal prices in order to ensure uniformity in the rates of the essential raw material across the country.

A committee under the chairmanship of the Central Electricity Authority (CEA) chairperson was set up earlier this month to look into the matter.

"The committee will work toward pooling of international and domestic coal prices so that the cost of production does not rise. As international coal is expensive and also domestic coal is not sufficient for the plants," a senior Power Ministry official said.

Pooling refers to the process in which domestic and international prices of material are averaged out to enable uniformity of rates for all consumers, irrespective of where they are sourcing the material from.

The committee comprises officials from the power, coal and environment ministries, the Planning Commission and state government officials.

The report of the committee on the issue is expected on Wednesday.

The move of the government comes amid concerns that rising international coal prices and insufficient availability of the raw material in India will hurt power generation activities.

The pooling of coal prices is likely to be based on the same price pooling principle adopted by the government for LNG. In the case of liquefied natural gas, the price of LNG sourced through long-term contracts at a cheaper price is pooled with the rates for more expensive LNG sourced from the spot market to ensure that consumers across the country avail of an uniform, average price.

The Power Ministry is exploring every opportunity possible to make coal available to companies at a low price so that electricity generation does not suffer and power tariffs are not driven up.

It has set an ambitious target for adding 1,00,000 MW of power in the XII Five-Year Plan (2007-12) from all sources of energy.