Centre Sees Little Light In Mseb Pricing Formula

This will have a bearing on the power tariff that MSEB pays. As the Bhadrawati project is slated to get a central counter-guarantee, a higher cost of fuel would also mean that the Union government would be exposed to higher amounts. MSEB had roped in ICICI to recommend an appropriate pricing methodology for the sale of coal after Ispat group refused to accept the method adopted by BICP.

Officials said that though ICICIs methodology does reflect the actual price of coal but it also gives the promoter tremendous scope to overplay actual costs. Under BICPs methodology, the price is calculated on an accounting basis implying the cost is arrived at after accommodating all the costs that go into producing and supplying the product plus a small margin for the manufacturer. ICICI, however, has recommended an opportunity cost based methodology for Bhadrawatis captive coal mine.

Under this, the final price of coal is arrived at on the basis of the price that the promoter would have to pay to purchase it from the next best source. This could involve either importing coal or sourcing coal domestically. Apart from this, ICICI has also worked out the principles of risk allocation and corporate tax variation in the pricing of coal for MSEB.