New Delhi: Apprehending that captive block holders may pocket huge profits, the Coal Ministry has opposed a suggestion by the Planning Commission that they be allowed to sell surplus dry-fuel.

The Commission, in a letter to the ministry last week, had suggested that incentives could be provided to block holders for the development and production from the mines by allowing them to sell coal.

"The value of the mineral held by the captive coal holders is very high in terms of on Sunday's prices and block holders will be unduly benefited if permitted to sell coal. If the suggestion of the Planning Commission is agreed to it... will pave the way, allowing captive block holders to make huge profits," coal ministry has said in reply to the Plan panel.

Sources said the issue is likely to come up in a meeting of coal and power ministries on Monday on ways and means to meet the growing demand for coal in the power sector. It is scheduled to be chaired by Prime Minister Manmohan Singh.

Contending that only 28 coal blocks out of 193 alloted to various power, steel and cement firms in the past 18 years for captive use have come to production, the ministry is of the view that if they are permitted to sell coal they would not show interest in bringing up their end use plants.

"...If a part of these reserves are diverted... block holders would again turn to government for making available equivalent amount of reserves for meeting their requirements sometime in future after extracting profit from reserve...if they start selling coal, they would never show interest in bringing up end use plant," the Coal Ministry said.

Contending that the block holders were allotted mines free of cost for power generation, it added that the proposal of selling coal will not only lead to government's criticism but would allow firms to take undue advantage of the allocation.

Arguing that any such move will be violative of the provisions of the Coal Mines Nationalisation Act, the Ministry said, if the government believes that the coal sector should be opened for commercial mining, it would be prudent to pass the pending Coal Bill 2000.

"We have already delayed this decision and the Bill has been pending in Parliament since 2002," it said, adding that this is all the more important to attract large scale investments.

The ministry also disagreed with the panel's suggestion of increasing the prices of domestic coal to partially meet the high generation cost, saying "it will go against the spirit of power sector reforms."

The Coal Ministry also disapproved the Commission's suggestion of pooled pricing, stating, "...any mechanism to share the burden of imported coal pooling it with domestic coal prices would imply cross subsidising power generation costs which is contrary to the power sector reforms".

The proposed move, it said, would erode the margins of Coal India Ltd. The ministry also stated that since CIL has expertise in coal production, handling of import of fossil fuel by the public sector firm does not seem to be a desirable option.

The ministry suggested that the power sector should import the fossil fuel through trading organisations like MMTC and STC.

Meanwhile, on Monday's meeting of the ministries assumes significance as faced by coal shortage, power generation in the country was severely hit last month with many areas plunging into the darkness.

The coal shortage in the current fiscal is projected at 142 million tonne (MT) and is likely to exceed to 200 MT by 2016-17.

(Agencies)