Import target heat on power firms

Penalty likely for import shortfall, to discourage firms from missing generation targets.

Power utilities may be penalised for importing less than the targeted amount of coal. One of the options being explored is to reduce the subsequent year's domestic allotment of coal by an amount equivalent to the shortfall.

The move was aimed at following a carrot and stick approach by incentivising imports but also discouraging companies that do not import and miss their generation capacity targets, A K Basu, chairman Central Electricity Regulatory Commission said.

Under the current practice, the power ministry sets targets for power utilities with regard to the quantum of imports through the year. The move is meant to encourage import of cost effective coal.

"A system of penalty for power utilities will be evolved. There will be suitable disincentives for companies failing to import the stipulated amount of coal," official sources told Business Standard. The ministry has already intimated power utilities of the decision.

The proposal was mooted by the power ministry in response to a suggestion of the Energy Coordination Committee to levy a 3-5 per cent cess on domestic coal to encourage import of coal. The proceeds from the cess would then be used for improving infrastructure for the energy sector.

However, the Committee of Secretaries on Power found that the power utilities were willing to import coal even without imposition of a cess and had already placed orders for the same.

Instead the power utilities should be asked to adhere to their import targets and there should be disincentive in case of default, it felt.

The ministry of power will closely co-ordinate with the shipping and railways ministry to ensure that there was no infrastructure constraint for importing 20 million tonnes of coal in the next fiscal.

The shipping ministry said while 13 million tones of imported coal could be handled by the major ports, the minor ports under state governments would handle the balance.