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Restrict surplus coal transfer within end-use sector: Chaturvedi panel

Surplus production, if any, has to be transferred to the nearest CIL subsidiary at a transfer price decided by the government


Captive coal mining companies should be restricted from transferring surplus coal production outside their end-use sector, a high-level panel headed by Planning Commission member B K Chaturvedi has recommended. The surplus coal should be transferred at the notified price, it said.  

These firms will have the option of disposing of the surplus coal with either the nearest Coal India (CIL) subsidiary or other firms in the same sector facing shortage in linkage coal from CIL, the panel said in its recently-submitted report on coal banking, an official close to the development said.

The current captive coal-mining policy strictly prohibits companies, private and public, from selling coal mined from the captive blocks. Surplus production, if any, has to be transferred to the nearest CIL subsidiary at a transfer price decided by the government. The new policy would have to be approved by the Cabinet and may require amending the Coal Mines Nationalization Act 1973 and the existing 170-odd Letters of Allocation.

CIL had recently expressed its reluctance to be a part of any coal-banking arrangement. The Planning Commission had, then, initiated discussions on the possibility of allowing private companies to transfer coal to each another. Firms in the thermal power-generation sector consume a bulk — 75 per cent — of India’s annual domestic 558-million tonnes (mt) production. The power ministry has told the Planning Commission that the proposed system of coal banking should not lead to profiteering among the coal block holders. The ministry has also called for the setting up of an empowered committee to decide on the transfer prices of surplus coal from one project to another.

The government has allocated a total of 218 captive blocks to companies between 1993 and 2011. Of these, 47 blocks have been de-allocated. Captive coal-mining companies were expected to produce 100 mt by the end of the last five-year Plan period in March 2012. However, production from captive coal mines has remained stagnant at a level between 30 mt and 36 mt over the past four years, giving rise to a historic coal availability crisis. During the same period, CIL’s production has grown 4.8 per cent to 452 mt.

The idea of coal banking was floated by the Association of Power Producers (APP), an industry body representing 20-odd power companies. According to the original APP proposal, CIL should be made the custodian of surplus coal output, which is expected to be close to 28 mt by the end of the current Plan period in 2017. The banking proposal will allow companies — which are experiencing delays in the commissioning of the end-use project but have developed coal mine — to transfer coal to another company, where the end-use project has been commissioned before the coal block, and receive the coal at a later stage.

Source: Business Standard