Odisha objects to new coal price pooling formula

Says the pricing is meant to subsidise private power generators

The Odisha government has objected to the new coal price pooling formula proposed by the Central Electricity Authority (CEA) and Coal India Ltd (CIL), saying the revised pricing mechanism is aimed at subsidising private power generators.

“If pooling of price is followed, it will ensure subsidy to those power plants, which do not have coal linkage. Private power generators will be mostly benefited at the cost of the state and the general public,” said Pradip K Jena, state energy secretary in a letter addressed to the Central power ministry.

CIL, as per a directive issued by the President of India, has been mandated to supply 80 per cent of the total amount of coal it has agreed to provide under Fuel Supply Agreement (FSA) to the power generators who set up plants between 2009 and 2015. The most of these power plants are coming up in the private sectors. But as the miner realised it can only supply 65 per cent of the agreed quantity due to age-old production techniques and other issues, it planned to import 15 per cent of the FSA quantity and pass on the extra cost to the stakeholders.

However, CIL’s earlier price pooling formula, which involved sharing of 25 per cent of imported coal cost by all power generators and 75 per cent by individual generator, received lukewarm responses.

This compelled the company to revise the formula. The revised price pooling method says, if the imported coal cost goes beyond Rs 4,500 per tonne, then the differential amount would be passed on to domestic coal prices. This has angered Odisha, the second biggest producer of coal in the country.

“The particular proposition of blending price of the imported coal with that of domestic coal possibly does not make any sense to those generating companies located very close to the coal mines,” Jena said.

Many government-owned power plants in Odisha use low grade coal, priced at around Rs 1,000 per tonne. If the new pooling price is adopted, the rates could go up by more than Rs 100 per tonne since international coal prices vary time to time, he added.

The Odisha energy department feared the rising coal prices would be passed on to the power consumers of all states and hence, it is not a good economic decision.

“We are of the view that the blending price of imported coal with that of domestic coal is not at all good economic justification and therefore, should not be considered,” the energy secretary said, reflecting the views of the Odisha government.