20 JUL, 2012, DEBJOY SENGUPTA, ET BUREAU
KOLKATA: The ministry of power has agreed to the model for price pooling of coal, which was proposed by the ministry of coal, to even out the impact of expensive imported fuel on power generation.
A senior executive with a public sector power company told ET that the model has now been sent to the Prime Minister's Office (PMO) for clearance.
"Once the PMO clears it, the coal ministry will ask Coal India (CIL) to adopt the price pooling mechanism at its board meeting," the executive said requesting anonymity. The board of Coal India is due to meet on July 31. Price pooling essentially means common pricing of similar grade coal.
This price is arrived at by taking the average price of imported and domestic coal. The model proposes that all consumers equally share the common price. Power producers have already accepted the proposed model. "According to the model, Coal India will import coal and then supply it to power generators," the executive said.
"Power plants in coastal areas will be supplied 30% of their total requirement in imported coal, while those within 300 km of the coastline will be supplied 15%. Rest of the generators will use 100% domestic coal. The resultant increase in price of coal will be distributed equally among all consumers irrespective of the coal supplied."
Once the price pooling model is adopted, power tariffs for plants located in the east are expected to increase more in comparison to the units that are in the coastal regions of the west. Although units in the east mostly use domestic coal, they will have to pay more for coal under the price pooling mechanism.
Imported coal will increase the cost of generation for coastal power producers as well as they will use 30% of imported coal, which costs more than double of domestic coal supplied by Coal India.
Power generated by a 70:30 blend of domestic and imported coal will increase the cost of generation by 10-15 % for a unit, compared to a unit that uses 100% domestic coal. Coal India has said that it cannot meet coal demand from power producers on its own.
According to some estimates, the country will see a shortfall of about 70 million tonnes of coal this year. This shortfall has to be met through imports . But power producers could have some relief as coal prices have fallen over the past few months in the international market.
The spot price for thermal coal in Indonesia has declined from $100 a tonne to $75 in the last six months.
According to Coal India's production target, it will only be able to supply 65% of the requirement for plants that have come up after December 2009. This effectively means that power units will be able to operate only at 55% plant load factor and will need imported coal to enhance capacity utilisation.
KOLKATA: The ministry of power has agreed to the model for price pooling of coal, which was proposed by the ministry of coal, to even out the impact of expensive imported fuel on power generation.
A senior executive with a public sector power company told ET that the model has now been sent to the Prime Minister's Office (PMO) for clearance.
"Once the PMO clears it, the coal ministry will ask Coal India (CIL) to adopt the price pooling mechanism at its board meeting," the executive said requesting anonymity. The board of Coal India is due to meet on July 31. Price pooling essentially means common pricing of similar grade coal.
This price is arrived at by taking the average price of imported and domestic coal. The model proposes that all consumers equally share the common price. Power producers have already accepted the proposed model. "According to the model, Coal India will import coal and then supply it to power generators," the executive said.
"Power plants in coastal areas will be supplied 30% of their total requirement in imported coal, while those within 300 km of the coastline will be supplied 15%. Rest of the generators will use 100% domestic coal. The resultant increase in price of coal will be distributed equally among all consumers irrespective of the coal supplied."
Once the price pooling model is adopted, power tariffs for plants located in the east are expected to increase more in comparison to the units that are in the coastal regions of the west. Although units in the east mostly use domestic coal, they will have to pay more for coal under the price pooling mechanism.
Imported coal will increase the cost of generation for coastal power producers as well as they will use 30% of imported coal, which costs more than double of domestic coal supplied by Coal India.
Power generated by a 70:30 blend of domestic and imported coal will increase the cost of generation by 10-15 % for a unit, compared to a unit that uses 100% domestic coal. Coal India has said that it cannot meet coal demand from power producers on its own.
According to some estimates, the country will see a shortfall of about 70 million tonnes of coal this year. This shortfall has to be met through imports . But power producers could have some relief as coal prices have fallen over the past few months in the international market.
The spot price for thermal coal in Indonesia has declined from $100 a tonne to $75 in the last six months.
According to Coal India's production target, it will only be able to supply 65% of the requirement for plants that have come up after December 2009. This effectively means that power units will be able to operate only at 55% plant load factor and will need imported coal to enhance capacity utilisation.
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