CERC proposes new index for imported coal

Plans to include Indonesian coal price to index that considers prices of mineral from Australia & S Africa

The Central Electricity Regulatory Commission (CERC) has proposed a modified composite index on payments for imported coal. It said this was necessary, as now, coal from Indonesia formed a significant part of steam coal imports into India and price index developers such as Platts were publishing an Indonesian coal price index (Platts-Indo Coal).

Currently, for payments for imported coal, CERC uses a composite index that considers Australian and South African coal.

In a discussion paper, CERC said in 2010-11, 73 per cent of the imported coal was from Indonesia, while 24 per cent was from South Africa.

 Data on average imports of steam coal for the last three years shows about 76 per cent was imported from Indonesia, while South Africa accounted for 19 per cent of the imports.

 In the last three years, average imports from Australia stood at only one per cent.

“The modified index is linked to international coal prices, as the policy of the Indonesian government requires coal exporters to align export prices to international prices. Keeping in view these developments and the request by some power producers in India, who are importing coal from Indonesia or have made contracts to import coal from Indonesia, it has been decided to include Indonesian coal prices in the indices, while computing the escalation rate for imported coal (for payment purposes),” CERC said.

It added the proposed revision in the methodology aimed at incorporating the Indonesian coal price index in the overall index and assigning appropriate weights to the other indices in the composite index.

CERC’s proposal comes at a time when private power developers are seeking a revision in rates in the wake of changes by the Indonesian government in the field of coal exports.

 In recent judgments on petitions filed by Adani Power and Tata Power, the Central Electricity Regulatory Commission had proposed compensatory rates to provide relief to power generators affected by amendments in Indonesian coal export regulations.

Ashok Khurana, director-general, Association of Power Producers, told Business Standard, “CERC’s proposed formulation reflects the real ground position much better than earlier.”

CERC said that in 2010-11, about 73% coal was imported from Indonesia and 24% from South Africa. Data on average import of steam coal for the last 3 years shows about 76% from Indonesia and 19% from South Africa. The import from Australia was insignificant, the average for last three years being around 1%.