Coal price pool may be expanded

Encouraged by rising production from Coal India, fresh Cabinet note likely on earlier scheme

Drawing comfort from Coal India Ltd’s improving output, the government is mulling whether to expand coverage of the proposed coal pooling scheme.

The coal ministry is likely to float a note seeking the Cabinet’s approval for increasing the quantity to be supplied by CIL under pooling. According to the fresh proposal, floated in line with a recent recommendation of the Cabinet, the state-owned mining company will have to supply coal from Indian fields (‘domestic coal’) for 78,000 Mw of new generation capacity against the 60,000 Mw originally sought to be covered.

The additional 18,000 Mw capacity includes power projects of 7,000 Mw capacity with valid Letters of Assurance (LoAs) and likely to be commissioned by March 2015 but left out in the original estimate of the power ministry. And, an additional 11,000 Mw from projects granted tapering linkages (the term for the short-term coal commitment provided to those coal consumers allocated captive blocks for meeting the requirements of their linked end-use plants (EUPs), in cases where the production of coal from these blocks does not synchronise with the requirement of the EUPs).

“Taking into account overall domestic availability and demand from these power plants, approval will be sought for CIL to sign Fuel Supply Agreements (FSAs) for domestic coal quantity of 65 per cent for the first two years starting this financial year, and then 67 per cent and 75 per cent, respectively, for the remaining two years,” according to a person privy to the development. Actual supply, though, would commence only when the required long-term power purchase agreements (PPAs) are signed by the power companies.

The ministry will also seek the Cabinet’s approval for allowing CIL to meet the remaining obligation of supplying coal under the FSAs by importing and supplying to power companies on a cost-plus basis. The companies would have the option of importing coal themselves to meet the rest of the requirement.

The Cabinet had, in its previous meeting on April 22, had decided CIL would continue to supply domestic coal at 90 per cent of the Annual Contracted Quantity (ACQ) for pre-2009 power projects at notified prices. CIL would supply domestic coal at 65 per cent of the ACQ for post-2009 projects with valid LoAs and PPAs concluded on a cost-plus basis (67,000 Mw). The Cabinet had also asked for ascertaining the details of demand from projects to be commissioned before March 2015, where PPAs have been concluded on a competitive-bid basis (14,450 Mw), those where no PPAs have been signed (14,160 Mw), projects with tapering linkages (11,460 Mw) and those with high debt exposure but without any linkage (4,460 Mw).

Meanwhile, a Group of Ministers under Agriculture Minister Sharad Pawar has already recommended making adequate coal supplies available for power projects which have been granted tapering linkages. To resolve issues surrounding the development of these 11,000 Mw of projects, an inter-ministerial committee has been set up under the coal secretary to find solutions for the genuine difficulties of developers.