GoM arrives at consensus on coal regulator

Pricing power likely to remain with coal companies

After prolonged discussions over the past year, a ministerial panel looking at the Coal Regulatory Authority Bill has arrived at a consensus on setting up a regulator for the coal sector. However, the regulator is unlikely to either fix prices or allocate blocks — two prime functions originally sought to be given to it.

After the fourth meeting of the panel, Finance Minister P Chidambaram, who is heading the nine-member Group of Ministers (GoM), said: “The discussions on coal regulator are over. Pricing power will remain with coal companies and the government will not interfere.” He added that the coal ministry will add further details after which the draft Bill will be sent for legal vetting. “Another meeting will be required.”

According to the latest draft of the Bill, the regulator will decide the methodology for fixing prices to check abuse of monopoly by any producer, but coal companies will decide prices. Currently, state-owned Coal India Ltd (CIL) accounts for 82 per cent of the domestic 530-million tonne coal production. While the coal prices are theoretically de-controlled, the government continues to control pricing decisions, a trend that has irked CIL’s shareholders.

In May last year, the Cabinet had asked for formation of the GoM to thrash out inter-ministerial differences over the proposal. In its first meeting in July last year, the panel had said that the CIL board’s autonomy needs to be kept in mind, but the regulator should have the power to counter the methods and practices of a monopolistic player. It had also suggested that the core functions of the ministry need to be preserved.

The ministerial panel had also asked for provisions to ensure that the regulator does not interfere with laws related to safety in mines and environment. The sector’s independent regulation is to ensure competitiveness of market sales, fixing guidelines for price revision and increasing transparency in allocation of reserves.