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House panel seeks review of coal pricing formula

A parliamentary panel has said the government was "silent on any kind of formula/methodology" followed in determining the price for ensuring financial viability of new coal mining projects and recommended that state-run coal companies should not include the cost estimation of new projects while determining price of their output with a view to reducing burden on consumers.

The latest report of the Standing Committee on Coal and Steel, tabled in Parliament on Friday, noted that according to the coal ministry, as per the guidelines it is necessary for Coal India to set prices at a level where financial viability of new projects is ensured.

The ministry also maintained that the "modernisation of existing mines for augmentation of production to achieve planned production involves additional investment, for which surplus generation from profit is utilized".

But the report said the ministry's reply was silent on any kind of formula/methodology which is followed in determining the price component, which is used for ensuring financial viability of new coal projects.

Terming the ministry's justification "far from convincing", the report said it should review the present methodology of including the cost of new projects while determining coal price, adding it unnecessarily increases the burden on consumers.

But the report also has a word of praise for the coal ministry's efforts to enact the Coal Mines (Special Provisions) Act, 2015 that paved the way for auctioning blocks.

"The committee, therefore, put on record their appreciation for the endeavours made by the ministry in this regard with the reported estimated amount of revenue likely to be raised in respect of 33 coal blocks already auctioned standing at Rs 2,09,740.25 crore," the report said.

source: http://timesofindia.indiatimes.com