KOLKATA – The Indian government has decided to vest powers of pricing, including a pass-through mechanism, with the proposed Coal Regulatory Authority, overriding opposition from producers.

Arriving at a consensus between the Power and Coal Ministries, which had taken divergent stands on pricing, the government decided to vest with the regulator, powers over the supply, quality and pricing of coal.

The Coal Regulatory Authority Bill would now be forwarded to the Cabinet for approval and then sent to Parliament, an official said.

The development marked a shift, as government had earlier sided with the Coal Ministry in opposing pricing powers to the regulator.

The most significant issue which was settled by a Group of Ministers convened to determine the powers of the regulator, was enabling it to frame a pass-through mechanism under which the price of coal supplied to thermal power generating companies would factor in the cost of coal sourced from both domestic mines and imports.

This pass-through mechanism would eliminate elements of subsidy in a pool price mechanism which averaged the price of domestic and imported coal.

Earlier last month, the government had failed to finalise a pool price mechanism, facing opposition from coal producers, including Coal India Limited (CIL), claiming miners would have to bear losses on their balance sheets if higher-priced imported coal was to be averaged with domestic production.

The regulator, which would have an appellate body attached to it, would be the arbitrator on fuel supply agreements between coal producers and thermal power companies, fixing guidelines for price revisions, ensuring transparency in e-auctions, and governing coal trading and allocation of coal reserves for standalone as well as captive mines, the official said.

Significantly, the speedy setting up of a regulator was necessitated by the prolonged disputes between CIL, which accounts for over 80% of domestic supplies, and NTPC Limited, the country largest thermal power generator.

Recently, NTPC held back payment of $178-million owed to CIL claiming poor coal supplied to it was of poor quality. At the same time, CIL had been dragging its feet in concluding fuel supply agreements with various NTPC power plants on the grounds that penalties for supply shortfalls being insisted on by NTPC were too harsh.

Courtesy: mining weekly