National Energy Policy draft proposes ‘open’ coal market, subsidy for power consumers to shield them from effect of possible rise and power generation cost
In what could be termed as a major step towards ‘market pricing’ of coal, National Institution for Transforming India (NITI) Aayog has come up with a draft National Energy Policy that proposes to make all seven subsidiaries of Coal India Limited (CIL) including Western Coalfields Limited (WCL) as independent companies.
In the draft released recently, NITI Aayog stresses upon introducing ‘greater competition’ in ‘opaque’ coal economy. To achieve this goal, it has floated the idea of corporatising seven subsidiaries of CIL into independent companies and ‘allow them to compete against one another in an open coal market’. Also, it has proposed ‘comprehensive reforms’ in allocating coal blocks ‘on commercial lines’ to independent companies specialised in coal mining. As per the draft, these two steps will replace the current system of administrative allocation of coal by a market with ‘prices performing the function of allocation’. To boost this concept, the draft proposes that CIL should do away with ‘differential pricing’ of coal for different category of consumers.
NITI Aayog feels that the resulting competition will increase efficiency in the sector and also reduce coal prices substantially.
However, as bulk of the coal is consumed for thermal power generation, such competition and ‘open market pricing’ may do away with subsidised rate of coal and increase the cost of power generation. Obviously, the power generation companies will pass on the increase in cost to consumers through rise in sale price of electricity. However, NITI Aayog feels that competition will reduce prices. Still, considering the ‘potential adverse impact’ on consumers, it has suggested that the Government may think of giving subsidy to consumers through Direct Benefit Transfer (DBT) scheme.
Considering the projections of increase in coal demand to support the growth in installed thermal power generation capacity of the country by 2040, the draft National Energy Policy pitches for ‘synergising’ the effort of Geological Survey of India, Coal Mine Planning and Design Institute, and Indian Bureau of Mines, to undertake ‘100% resource mapping of coal.’
Further, NITI Aayog has stressed the need for an independent statutory Coal Regulator, to ensure that decision-making is ‘at arm’s length’ when coal sector opens up to encourage commercial mining and move towards market pricing of coal. It feels that increased competition in the wake of opening up of coal sector will improve productivity and production of coal, and also help in reducing imports. Its logic is that if the delivered price of domestic coal is lower than that of imported coal, the buyers will not go for imports.
As per the data collected while preparing draft National Energy Policy, in 2015-16, total supply of coal was 840 million tonnes, of which 540 million tonnes was supplied by CIL’s seven subsidiaries. Singareni Collieries Company Limited, owned jointly by Government of Telangana and Government of India, supplied another 60 million tonnes. Of the remaining 240 million tonnes, around 200 million tonnes was imported, and private companies contributed 40 million tonnes.
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