Mumbai: Coal India should adopt a pooling formula on prices by combining the prices of imported and domestic coal to offset the impact of high import costs, Planning Commission
Deputy Chairman Montek Singh Ahluwalia said on Friday.

"As the import will get expensive, I suggest Coal India should adopt a 'coal pooling formula', which will propose to calculate pricing of the material by mixing the imported and domestic coal," he said while addressing the Skoch Summit here.

He added that the state-owned coal utility needs to step up the supplies to power producers and should go for imports, in case of shortfall in domestic production.

"Coal supply is not keeping up to supplement power generation. I think, there are many ways (through which) we can remove the bottlenecks. Firstly, Coal India must deliver in time. Secondly, production from captive mines, given to private and public sector companies, can be increased. Thirdly, by importing coal," Ahluwalia said.

Since January, Coal India (CIL) has been supplying the raw material through a new pricing formula, which is based on gross calorific value (GCV) of the thermal coal.

However, after heavy criticism from the industry, it was forced to delink the rates from international parity prices in the GCV-based pricing to minimise the impact of increase in price.

Of late, CIL has been entangled into a controversy related to signing the fuel supply agreement (FSA), as many power producers, including state-run power major NTPC, have refused to sign the FSA as they feel it is tilted towards the coal producer.

The power companies are mainly opposed to penalty clause in the FSA as per which CIL will not be liable to pay the penalty for first three years, in case of shortfall in supplies. Besides, it will have the right to decide the penalty, in case of disagreement.

In a letter to the Coal Ministry last month, the Power Ministry had flagged concerns raised by power producers regarding the model FSA and had requested to ensure that CIL inks fuel pacts with power companies within a month based on 2009 model FSA, by only changing the minimum supply level to 80 per cent.

The government, in April, had issued a directive to Coal India to commit itself to a minimum of 80 percent of fuel supply to power producers, failing which it would attract penalty. The directive was issued following a meeting between the power sector honchos and the PMO.


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