Coal Pricing Rights Stay With Coal India as Government Intros Regulator

Fresh steps initiated by the Government of India could usher in reforms in the coal sector and reduce the gap between domestic demand and supply, something that has been universally welcomed across public and private sectors.

Over the past two weeks or so, the government has been announcing several measures that all add up to bringing in a new climate in the coal sector.

Among the first steps it announced was the setting up of a regulator for the coal sector, a move that has been pending for almost six years. The regulator’s role would be to prescribe the principles for price determination of the fuel, though pricing rights will remain with the state-owned monopoly, Coal India.

The regulator will have an advisory role regarding formulation of policy in coal production and competition and investment in the coal sector, and would also regulate testing of grade or quality of coal.

A report in The Economic Times stated a chairperson would head the coal regulator and include four more members.

This move was followed up by yet another announcement by the government that the coal-deprived Coal India would start receiving all surplus coal from captive mines in various states of the country.

Analysts following the coal sector, while welcoming the move, said it only made sense to do this because India faced a huge and growing shortage of coal, its main source of energy, forcing end-users to rely on imports from Australia and South Africa.

In fact, some have opined that the entire policy of captive mining (where power plants need such mines to source their coal) needed a second look because it was a “restrictive” policy instead of a progressive or competitive one.

The move would result in increasing the stock of dry-fuel with Coal India, which missed its output target of the previous fiscal year by 3 percent, producing 452.5 million tons against the target of 464 MT.

Late on Wednesday, the Coal Ministry said it had indeed prepared a draft policy on the utilization of surplus coal from captive mines. The note have now been circulated to various government-level secretaries for comments, and a final report was expected within two weeks.

The Power Ministry suggested to the Coal Ministry to incentivize surplus coal production from captive mines in a bid to produce more coal. Domestic coal demand was at 772.84 million metric tons against production of 557.60 MT in the last fiscal year.

Read more Indian perspectives from Sohrab Darabshaw.

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