The ongoing fuel crunch for power plants on the back of constrained production from the state-owned miner Coal India Ltd (CIL) has led to a massive spurt in costly coal imports. The Planning Commission had proposed the pooling mechanism under which domestic and imported prices of coal were to be averaged out to allow consumers to avail of uniform rates, irrespective of the fuel source.
State-owned miner Coal India Ltd (CIL) alone accounts for over 82 per cent of the domestic coal production of 530 million tonnes (mt) leading to 90 MT annual imports. The government had last year asked CIL to supply at least 85 per cent annual contracted quantity (ACQ) of power plants commissioned after March 2009.
However, the miner said it would not be able to meet more than 65 per cent of ACQ of plants. Serious discussion on pooling began in order to make imports viable and fill up the 15 per cent gap in supply. CIL will have to import 15 mt in the first year and 20 mt in the second to meet the shortfall.
However, as imports will jack up the cost of generation from coastal power plants, the cost of imported coal to such plants will be brought in line with CIL’s price of domestic coal of similar quality. The cost differential will be recovered by an across-the -board increase in the CIL price to linked consumers.
CIL has already indicated that this spreading of additional cost will result in increase of domestic coal price to an extent of around eight per cent, 21 per cent, 16 per cent and seven per cent during 2012-13, 13-14, 14-15 and 2015-16, respectively.