Indian Coal Privatization Proposal To Affect Pricing

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Continued from Part Two

Recent reports suggest that the government is working on a proposal under which CIL would engage private sector companies to undertake mining on behalf of the coal miner — which could affect coal prices in the medium- to long-term.

A PTI report suggests that top-level government officials recently discussed the proposal to involve the private sector under the public-private partnership mode.

The federal government also plans to empower the regulator being set up for the coal sector with the authority to decide pricing. The proposal, if implemented, would deprive CIL of the freedom it currently enjoys in fixing and revising prices of its output.

It is believed that the regulator’s primary function would be to set the prices of raw coal. However, the authority would not have the power to grant or cancel mining licenses.

Reports suggest that the Integrated Energy Policy (IEP) recommended setting up a regulator for monitoring coal resource development. The Energy Coordination Committee, headed by Prime Minister Manmohan Singh, had asked the Planning Commission to prepare a paper on the issue.

CIL has seven subsidiaries that produce coal. Its eighth subsidiary is into design and planning of the mines. Its coal production accounts for 80 percent of the country’s production.

As the government wants to improve the efficiency of CIL to also ensure fuel supply to the power producers, it has issued a presidential direction to the PSU to enter into a fuel supply agreement with the power plants. Coal India Ltd. has to commit at least 80 percent delivery; failing to do so would attract penalties.

That move, however, did not go well with the independent directors of the company.

We’ll keep MetalMiner readers posted with any follow-ups to the story. TC Malhotra contributes to MetalMiner from New Delhi.

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