Free pricing in near-monopoly situation affects consumers
High energy costs erode competitiveness of many sectorsNeed for periodic revisions of the fuel feedstock price
NEW DELHI: The Planning Commission has pitched for a coal sector regulator to ensure and approve periodic price revisions of the fuel feedstock, recommend steps for fixing coal prices and regulate trading margins while ensuring e-auctions free of price distortions.
In its recommendations on the coal sector, as part of the Integrated Energy Policy (IEP) released here on Wednesday, the Commission's expert committee headed by Kirit Parikh said: "The proposed regulatory body would, as an interim measure, approve coal price revisions, ensure coal supply to the power sector under commercially-driven long term fuel supply and transport agreements (FSTAs), facilitate developing formula for resetting coal prices... regulate trading margins.''
In keeping with the practice now in vogue for the supply of quality coking coal to the steel industry, the expert panel has recommended that coal of export quality should be sold at export-parity prices as determined by the import price at the nearest port, minus 15 per cent.
The panel suggested that 20 per cent of the coal produced should be sold through e-auctions. "For e-auctions to be successful, Coal India Limited should directly or otherwise ensure availability of coal and offer it for sale to meet the total demand,'' it said.
On the need for a regulator, the committee suggested that the pithead coal price under FSTAs should be revised annually. The coal regulator "should, inter alia, take into account prices obtained through e-auction, free-on-board price of imported coal and domestic production cost, inclusive of return based on efficiency standards,'' the panel said in its report.
Briefing newspersons here on Wednesday after releasing the report, the Commission Deputy Chairman, Montek Singh Ahluwalia, said: "The present energy scenario is not satisfactory. Energy is a vital input for production and this means that if India is to move to a higher growth rate that is now feasible, we must ensure reliable availability of energy, particularly power and petroleum products, at internationally competitive prices.'' Stressing the need to implement the IEP recommendations, Mr. Parikh said: "We pay one of the highest prices for energy in purchasing power parity terms. This has eroded the competitiveness of many sectors of the economy. The challenge is to ensure adequate supply of energy at the least possible cost.''
Arguing in favour of coal price regulation, the committee noted that decontrolling prices in a near monopoly situation was adversely affecting the consumers' interest. "In the absence of a coal market with competing suppliers, there is a need to develop a transparent mechanism for pricing domestic coal,'' the report says.
Turning to mining, the committee felt that captive block holders must be permitted to sell incidental coal surpluses to CIL during development and operation of a block.
"Group captive mines should be allowed for small end-users, and a target must be set for the Ministry of Coal to achieve at least 100 MT [million tonnes] of captive production by 2012," it said.
The committee has favoured greater reforms in the power sector coupled with more encouragement for private sector participation and reduction in transmission and distribution (T&D) losses.
The committee conceded that privatisation of distribution utilities "may not be politically possible in all States.''
However, agricultural consumers, at the least, must be provided separate feeders for assured power supply and the subsidy on account of free power must be borne by the State governments.
The IEP report also pointed to the lack of a level playing field between the Central public sector undertakings (PSUs) and the private entities engaged in the power sector.