P Chidambaram, Jyotiraditya Scindia, Sriprakash Jaiswal to discuss price-pooling mechanism

KOLKATA: Coal minister Sriprakash Jaiswal, power minister Jyotiraditya Scindiaand finance minister P Chidambaram will meet this week to finalise the price-pooling model. "There were two new suggestions from stakeholders on the format for price pooling and the ministers will now consider them following which it will be placed at the cabinet," said a senior ministry official who did not wish to be named.

One of the suggestions is that the price-pooling mechanism will now try to include companies that do not have coal supply commitments from any sources, say people aware of the developments. Some 16,000 mw of capacities do not have such supply contracts.

Price pooling is being considered for units that have been put up after April 2009. The model that was being considered included blending prices of imported coal and domestic coal to arrive at a higher uniform price that will be paid by all power producers. The model being mooted earlier required power generators to pay a single price that would have the cost of imported coal factored in. It is, unclear at this stage how CIL will account for the various categories of domestic coal that its various mines produce.

According to ICRA, prices will rise as a result of pooling. Overall impact on the variable cost of power generation at national level would have remained limited at present, estimated at about 18 paise/unit (which is about 8% of the overall cost of power generation). However, this impact would go up to about 37 paise/unit - at about 16% of overall cost - if blending of imported coal is assumed to increase up to 30% and coal price level remains unchanged. Hence, the overall cost of generation and, in turn, tariffs would remain more exposed to the volatility of international coal price.

Distribution companies of some states, including West Bengal, are not in favour of price pooling as they believe it will raise the cost of power for consumers. West Bengal and private power utilities in the state believe that price pooling is a ploy to help a few new independent power producers that saw their entire calculations go wrong after they built power plants based primarily on imported coal.