Coal Pool Pricing – How and what it aims to work for?
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Coal Pool Pricing – How and what it aims to work for?
In regard to the commitment of 80% supply, it has been estimated that CIL would be able to meet roughly 65% of the committed quantity through indigenous sources during the first three years of the current Plan and shortfall from 80% would require to be met by imported coal.
- In respect of the plants commissioned up to March 31, 2009, domestic coal will continue to be supplied as hitherto at Coal India Limited (CIL) notified prices.
- In respect of the plants (with aggregate capacity of about 60,000 MW) commissioned/ to be commissioned during the period from 1.4.2009 to 31.3.2015 and also other plants (with aggregate capacity of about 7,000 MW) that are likely to be commissioned by 31.3.2015 after achieving milestones, CIL will provide imported coal on cost plus basis to all producers willing to take such coal, in addition to domestic coal producers who have already signed. Fuel Supply Agreements (FSAs) with the provision of imported coal to be supplied by CIL on cost plus basis will also be given an opportunity to exercise their option afresh for imported coal on cost plus basis. Such plants as are unwilling to take imported coal on cost plus basis will be supplied imported coal at a pooled price. The pooled price will be worked out by CIL as per the methodology and modalities mentioned in the note.
- The guidelines in paragraph above will also be applicable in respect of the plants (with aggregate capacity of about 11,000 MW) which have been given tapering linkage.
- The case of the plants (with aggregate capacity of about 16,000 MW) which would be commissioned by 31.3.2015 but which have not been given linkage, any be examined by an inter-ministerial committee headed by Secretary, Ministry of Coal to see it the guidelines in paragraph 2 above can also be applicable in respect of these plants with a appropriate lower trigger for penalty; and
- The higher cost of imported coal will be allowed as a pass through as proposed in the note.
The Committee directed that based on the above guidelines, the Ministry of Coal and the Ministry of State (Independent Charge) of the Ministry of Power will work out specific capacities / quantities in consultation with the Ministry of Finance and thereafter, the Ministry of Coal will place an appropriate proposal before the CCEA within five weeks.
Existing provision of import of coal
Under the New Coal Distribution Policy (NCDP) of October 2007, "normative requirement" of coal is required to be supplied under Fuel Supply Agreements (FSAs) at 100% level in respect of regulated sectors of Power Utilities, Fertilizer, Defence & Railways and at the level of 75% for remaining coal consuming sectors. Clause 5.2 of the NCDP provides that "In order to meet the domestic requirement of coal, CIL may have to import coal as may be required from time to time, if feasible. CIL may adjust its overall price accordingly".
Need for Import of Coal through CIL
As per the existing import policy, any entity can import coal. Every year, CEA/MOP sets targets for import of coal by different power utilities and imports are being made accordingly. The basic reason stated by Ministry of Power/CEA and the power industry for supply of imported coal by CIL is the assumption that the fuel charge based on imported coal may not be a pass through in the cases of the competitively bid projects unless the coal supply is through CIL. According to them, failure in supply of full linkage quantity by CIL as per FSA/MoU is likely to have the following consequences:
- Developers are likely to default in supply of power as per PPA.
- Developers may not be able to recover full capacity (fixed) charge as the availability will be much below 85%.
- Default in payment by Developers (IPPs) to the Banks/FIs on account of non-recovery of capacity charge and ROE due to poor availability of plant.
- The cost incurred by DISCOMs in arranging electricity from other sources through short term/medium term would be much higher.
Status of import of coal by power utilities during 2011-12 and target for 2012-13
- The requirement of coal for Power Utilities for 2011-12 projected by CEA was 442 MT. Against estimated requirement, the indigenous availability was estimated at 388 MT (335 MT from CIL, 31 MT from SCCL and 22 MT from captive mines).
- The gap of 54 MT between projected requirement and indigenous availability was proposed to be met through import of 35 Million Tonnes (which is considered equivalent to about 54 MT of indigenous coal) by Power Plants, during 2011-12.
- Against the target of 366 MT for CIL and SCCL together, they supplied about 348.50 million tonnes, which is about 95% materialization, to the power utilities.
- The power utilities imported 27 million tonnes against the target of 35 million tonnes (about 80% of the target) during 2011-12.
- MOP has fixed a target of 46 MT for import by power utilities during 2012-13 to meet the gap between estimated indigenous availability and coal requirement. Till 31.10.2012, as against the pro-rata target of 26.8 MT, the power utilities have imported only 16.3 MT of coal.
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