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State-run Maharashtra State Power Generation Company (MahaGenco) has made a strong case for altering the formula to price coal supplied by Coal India (CIL)'s arm, Western Coalfields (WCL), to it.
“MahaGenco gets 50 per cent of its coal from WCL. However, WCL is insisting that it be paid ‘cost plus price’. The cost-plus price is charged by WCL for each project. Other public sector undertakings (PSUs) are getting coal from WCL at a notified price. Notified price is the price announced by CIL for all its mines. Cost-plus price is higher than the notified price. In view of WCL's move to switch step by step to cost-plus price from the notified price of annual contracted quantity (ACQ), the cost of generation is increasing,” a MahaGenco officer, who did not want to be named, told Business Standard.
The official said the present contracted cost-plus quantity is 24.27 per cent of the ACQ. With the additional offered cost-plus quantity, the contribution of cost-plus price would be 50.76 per cent of ACQ. He mentioned that pooling would help share the burden by other PSUs and not alone by MahaGenco.
A WCL spokesman said the decision about pooling did not come under its jurisdiction but was to be taken at the level of CIL.
According to the official, cost-plus prices in general were 44 per cent higher than notified prices. “WCL supplied 25.4 per cent cost-plus coal during April-November. MahaGenco had borne the additional financial burden of Rs 227.35 crore during 2012-13 due to the supply of coal on cost-plus price. Further, WCL is also asking for a bank guarantee of Rs 1,629.93 crore towards the supply of cost-plus coal for their upcoming coal projects,” the official said.
The WCL spokesman informed that the price of G9 grade coal supplied to MahaGenco at the notified price would increase to Rs 1,170 a tonne from the present Rs 1,070 a tonne due to a 9.35 per cent rise in price.
MahaGenco, with a thermal capacity of 8,000 Mw, procures 50 million tonnes of coal annually, of which 22.7 to 24 million tonnes (mt) is procured from WCL. During April-November, MahaGenco received 9.90 mt against a contracted 14.44 mt from WCL (69 per cent realisation).
The official said, “MahaGenco spends nearly Rs 3,500 crore to purchase coal from WCL. This is due to cost-plus coal supply from WCL. On top of it, CIL has increased the price of coal supplied by WCL to MahaGenco by 10 per cent. This would further lead to an additional burden of Rs 500 crore.”
The WCL spokesman, however, said the company was conducting an assessment of the impact due to a 10 per cent rise in price approved by CIL.
MahaGenco recently received a boost after the Competition Commission of India imposed a penalty of Rs 1,773 crore on CIL and its three subsidiaries for misuse of position as monopoly suppliers.
