Policy on surplus coal usage to be finalised in a month: Govt

The government on Friday said a formal policy on the usage of surplus coal produced in mines allocated for captive use to companies would be finalised in a month.

This follows a controversy over the government's decision to allow Reliance Power to divert surplus coal from mines allocated for the Sasan ultra mega power project (UMPP) for use in another project. The Comptroller and Auditor General (CAG) of India, in its leaked draft report, had recently alleged the decision led to “undue benefits” of Rs 15,849 crore to the Anil Dhirubhai Ambani Group subsidiary.

The auditor had later downplayed the report, saying, “The details being brought out were observations under discussion at a very preliminary stage, and these do not even constitute our pre-final draft. Hence, these are exceedingly misleading.”

“A formal policy on surplus coal would be finalised in 15 days or a month,” Coal Minister Sri Prakash Jaiswal said at the sidelines of an event. On April 29, an empowered group of ministers, headed by Finance Minister Pranab Mukherjee, decided not to review an earlier decision to allow the diversion of coal from the Sasan mines.

According to the policy guidelines, incremental coal produced from captive mines should be sold by a private developer to the nearest Coal India mine at a transfer price set by the government.

Once implemented, the new policy would pave the way for the government to fast-track progress of its UMPP programme, under which it wants to award at least 13 UMPPs to private developers. Sources said the bid documents for the next UMPP, scheduled to come up in Odisha, could not be finalised, owing to lack of clarity on whether surplus coal from captive mines would be allowed to be diverted.

Jaiswal said the Union Cabinet would take up the draft legislation for setting up a national regulator for the coal sector in its meeting next week.

Independent regulation of the sector is important in ensuring competitiveness in e-auction sales, fixing guidelines for price revisions for supply pacts, fixing trading margins and increasing transparency in the allocation of reserves. A coal regulator would also mean an end to Coal India’s monopoly in fixing and revising prices in the domestic market.

The coal minister also said the government was considering a "sovereign wealth fund" to help state-owned companies secure coal assets abroad. Coal India failed to clinch any deal to acquire stake in foreign assets or tie up long-term offtake for domestic use, even as the gap between demand and supply touched an all-time high of 85 million tonnes in the previous financial year.