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Govt revives proposal for CIL to import coal; pool with domestic produce

The government is reviving a proposal to ask monopoly state-run miner Coal IndiaBSE -1.83 % to import coal in large quantities and pool it with its domestic produce for pricing purposes, a move aimed at helping the power companies make better use of their plants that are running at 50-60 per cent for want of adequate fuel.

Last year, the government had shelved the pooling proposal and instead allowed power companies to pass on the price of imported coal to retail consumers. However, according to a senior government official, distribution companies in many states have not been purchasing costlier power, spelling a failure of the decision.

"Many states are not purchasing power if it is based on costly imports. But at the same it is important for the plants to run at optimal levels. The power ministry is now working on a proposal to ask Coal India to import coal and pool the prices of domestic with imported coal," said the official, who did not wish to be identified.

The official added, "Pooling will raise cost of coal and overall electricity tariff by about 10 paise, but it will help plants generate more, particularly those plants which are receiving less coal." Once drafted, the proposal will be sent to the coal ministry, which will take the matter forward. Indian companies import about 150 million tonnes of coal every year.

The government is banking on the low global prices of coal, but the success of the proposal will depend on the consent of the states and Coal India's ability to import coal in large quantities, the official said. Most state governments, including those of Gujarat and West Bengal, had last year objected to the pooling mechanism.

As per the fuel supply agreement signed with Coal India, power companies can ask the state-run behemoth to import coal in excess of the quantity agreed for supply. However, no company has availed the offer so far.


The coal ministry is separately working on a proposal to align prices of domestic coal with international prices to encourage investments in the sector. The proposed pricing model aims to increase profitability of Coal India to enable it to undertake necessary investment for expansion.

Source: The Economic Times