Ministerial panel on coal regulator to meet on Monday

Ministry wants proposed regulator to decide methodology for fixing prices to check abuse of monopoly by any producer

A nine-member ministerial panel headed by Finance Minister Pranab Mukherjee would meet Monday to finalize the draft of a bill to set up a coal regulator in the country, according to a coal ministry official. The second meeting of the panel comes at the backdrop of the coal ministry’s latest proposal that pricing power of the commodity should remain with coal producing companies.

The ministry wants the proposed regulator to decide the methodology for fixing prices to check abuse of monopoly by any producer. Currently, state-owned Coal India Ltd (CIL) accounts for 82 per cent of the domestic 530 million tonne (MT) coal production. While the coal prices are theoretically decontrolled, the government continues to control pricing decisions, a trend that has irked Coal India’s stakeholders.

The ministry, while acknowledging CIL’s freedom to fix prices, wants to check the current practice of price revisions by CIL in line with wage hikes. The ministerial panel too, in its first meeting in July last year, had said that the autonomy of CIL board 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.

Independent regulation of the sector is aimed at ensuring competitiveness of market sales, fixing guidelines for price revision and increasing transparency in allocation of reserves. The union cabinet had in May last year discussed the proposal to set up the coal regulator and had asked for setting up a Group of Ministers (GoM) to give a final shape to the Bill.

The private power producers’ lobby has raised objections to provisions in the bill related to cost plus pricing of coal which ensures at least a certain minimum margin for a developer over the cost incurred. The draft bill says that the pricing principles to be evolved by the regulator would be guided by safeguarding consumer interest and, at the same time, recovery of the cost of coal including a reasonable return to the developer.