A quick resolution was necessary on the issue of price pooling for domestic and imported fuel for power plants that were facing shortages of coal and gas supply, Planning Commission Deputy Chairman Montek Singh Ahluwalia said on Wednesday.
“In the next three-four years, I do not see any way of resolving these issues, unless high-level decisions are taken… both coal and gas (domestic and imported) prices have to be pooled,” Ahluwalia said at the India Energy Forum here.
Under the pooling mechanism, cheaper domestic coal as well as gas prices are averaged out with expensive imported fuel to get a reasonable rate for the feed stock for power plants.
Ahluwalia said there was a need to put in place a serious investment plan for the power sector. “We have to appreciate that the generation (of power) is increasingly led by the private sector. This investment has to be financed,” he said.
However, financing by banks in either generation or transmission needs to have viability of the operation on the basis of the quality of the entrepreneur on project management skills.
“This would not have been a problem, if the banks had a very strong position in terms of their own balance sheet,” Ahluwalia said.
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“There is a downturn, the NPAs (non-performing assets) are on the rise, the capital adequacy of banks is under stress, and this is happening at a time when globally there is huge pressure on banks,” he added. He said there was a need to recognise the problems of the power sector and that is why the Cabinet in September approved the restructuring plan. The government had approved restructuring of Rs 1.9 lakh crore debt of the State Electricity Boards in order to bailout the near-bankrupt power distribution companies.
Ahluwalia said the Electricity Regulation Act was not properly implemented and large consumers of power should be encouraged to enter into purchase agreements.