Coal regulator to have pricing power

Sudheer Pal Singh / New Delhi May 09, 2012,
Business Standard
The government plans to empower the regulator being set up for the coal sector with the authority to decide pricing. The proposal, if implemented, would deprive state-owned Coal India (CIL) the freedom it currently enjoys in fixing and revising prices of its output.

“The regulator’s primary function would be to set the prices of raw coal. A note on the Coal regulatory Authority Bill, 2010, has been sent to the Cabinet,” said a senior coal ministry official. He, however, added the authority would not have the power to grant or cancel mining licences.

Independent regulation of the sector is important to ensure competitiveness of e-auction sales, fixing guidelines for price revision for supply pacts, fixing trading margins and increasing transparency in the allocation of reserves. The draft legislation is likely to be discussed by the Union cabinet in its meeting on Thursday.
Setting up a regulator for monitoring coal resource development was recommended by the Integrated Energy Policy (IEP) framed by former Planning Commission member Kirit Parikh and the T L Shankar Committee on coal sector reforms. The Energy Coordination Committee, headed by Prime Minister Manmohan Singh, had asked the Planning Commission to prepare a paper on the issue.

The prices of coal currently being realised at e-auctions, the majority of which is supplied by CIL, are about 80 per cent higher than the notified price. The IEP had recommended the annual price fixation of coal as one of the roles of the proposed regulator. This would be based on the e-auction price, the free-on-board price of imported coal and the production cost. “Annual revision of coal prices would create some uncertainty, but no greater than the current one, where Coal India periodically revises coal prices,” the IEP had said.

The regulator’s functions would include specifying the quality and performance parameters, ensuring adherence to the mining plan, recovering penalties, monitoring the utilisation of funds for coal conservation and promoting clean coal technologies.

The Coal Regulatory Authority would comprise a chairperson and four members, one each for the legal, technical, finance and administration wings. The chairperson and the members would be appointed by a selection committee headed by the cabinet secretary.