The contentious issue of pooling the price of imported coal, pitted the apex association of power producers against a State utility.

Ashok Khurana, Director General of the Association of Power Producers, on Thursday, said the Indian power sector was passing through a critical phase, precipitated partly by government inaction and exuberance on the part of some private players.

“There seems to have been a disconnect between the power and the coal sector, as a result of which capacities have been set up without a realistic assessment of coal availability,” Mr. Khurana said at participative session on ‘India Coal story-the outlook’ organised by the Associated Chambers of Commerce and Industry of India (Assocham) and the Kolkata-based Financial Journalists Club (FJC).

Pointing out that imports were the only way out to prevent a bulk of bank loans given to the power sector from turning bad, he was critical of a section of the CIL board who were questioning the wisdom of price-pool which was an important component of the fuel supply agreements (FSA) that the Centre had directed CIL to sign with power utilities.

West Bengal Power Secretary Malay De, who is also the chief of the State power distribution entity, said that West Bengal strongly opposed the concept of pooling.

“It would do no good to people of West Bengal. This would amount to cross subsidisation of coal at a time when opening up markets seemed to be the norm. Stranded power assets which are not getting coal now can go and import directly,” he said.

Several other State utilities have also opposed price-pooling which will make coal costlier.

Bridging mechanism

The price-pool concept, mooted by the Planning Commission, was seen as a mechanism for importing coal to bridge the 15 per cent gap that has emerged between CIL’s capability to produce (which would meet only 65 per cent of the demand of the power sector) and the proportion agreed as per a government directive to CIL which has asked it to honour at least 80 per cent of the power sector’s demand.

Coal India Chairman S. Narsing Rao said that there was no magic wand for jacking up production and a 200 million tonne shortfall was likely in this Plan period.

He said that it had been decided to meet 15 per cent of the ACQ amount through imports on a cost-plus basis (given the resistance to price pool).

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