Autonomous body to regulate coal pricing

NEW DELHI: Coal pricing may soon come under the purview of an independent regulatory body. The coal ministry has initiated discussions to set up an autonomous body of experts that will replace the government committee which now determine coal prices for different user industries.

According to official sources, the move for an independent regulator for the sector gained momentum after two expert committees of the government endorsed it. Both the expert committee on coal sector reforms headed by TL Sankar and Planning Commission expert group on integrated energy policy headed by Kirit Parikh favoured independent regulation of domestic coal prices.

According to the initial blueprint being considered by the ministry of coal, the proposed regulatory organisation will comprise experts with wide experience of the sector. The regulator is expected to help in improving exploitation and allocation of available resources, regulate pricing of coal under e-auction and enable a competitive coal market to emerge for user industries. At present, coal prices are fixed by the coal ministry in consultation with coal PSUs — Coal India and Singareni Collieries Company.

Prices are determined on the basis of costs incurred in coal production from different mines in a coal company plus a reasonable amount of profit.However, this method is considered grossly inadequate in the present context and results in coal prices not reflecting market realities.

The Parikh Committee, which is likely to finalise its report on Integrated Energy Policy this month, has also suggested that the powers of the proposed regulator should also include determining the quantity of coal annually required from each mine to be put under e-auction route.

It has proposed that that 20% of total coal production should be brought under e-auction and remaining coal should be sold through a fuel supply and transport agreement (FSTA) with power sector for 100% of its requirement. Other consumers should be allowed partial FSTA, leaving them to meet the shortfall through e-auction and imports.

Pithead price of coal under FSTA should be revised annually by the coal regulator based on a formula that reflects prices obtained through e-auction, FOB price of imported coal and production cost, the committee has said.

Earlier, in the first part of the report submitted to the coal ministry, the Sankar Committee also favoured institution of a coal regulator primarily to regulate prices for the prime consumer — the power sector.