Govt forms panel to look at captive ‘coal banking’

The committee to be notified soon,would be headed by Planning Commission member BK Chaturvedi and comprises the finance ministry’s chief economic advisor Raghuram Rajan,coal secretary Sanjay Kumar Srivastava and CIL chairman S Narsing Rao.

Although the power sector would be the key beneficiary,it is understood that no power ministry official has been made a member of the panel.

The proposal for coal banking has been moved by the Association of Power Producers (APP),a representative body of private power developers,which has argued that large-scale coal imports of nearly 160 million tonne (MT) every year would hardly suffice in meeting the fast growing needs of the domestic power generation industry during the 12th Five Year Plan. As an alternative,the APP has proposed that the government should consider incentivising coal block owners to produce 100 MT annually.

In a formal proposal to the Plan Panel and coal ministry on June 3,the APP has prescribed the methodology of implementing the coal banking system. It says that power project developers having no immediate requirement of the surplus fuel produced from their mines should allowed to park their produce with CIL to help the miner meet its shortages.

After completion of the banking period,CIL would return the coal to the block owners as per a mutually agreed schedule. Although some power companies could be beneficiaries if the proposal sails through,but the bigger beneficiaries could be those which are setting up ultra mega power projects (UMPPs) that have operational coal blocks. One such developer is Reliance Power,that is setting up three UMPPs of 4,000 MW each in Sasan (Madhya Pradesh),Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand). For Sasan it has been given three blocks of which,two are believed to be operational.

But this is banking is not for free as the APP has suggested that CIL would make an “advance payment” during the banking period to the captive block holder. “CIL to sell the coal to its customers and effectively recover the advance payment from them at a price,which may include some trading margins for coal supply,” the Association has recommended in its proposal.

However,after expiry of the banking period,CIL should hand over the coal to the block owners and should reimburse the incremental freight cost to their end-use plant to them,the association has proposed.

The APP has said that the concept is workable as such an arrangement is currently in existence for renewable energy and captive power plants where electricity is banked with the distribution companies.

THE CONCEPT

* The proposal has been mooted by the Association of Power

Producers,an umbrella body of private power generation companies

* Under the scheme coal from captive mines of power developers would be ‘banked’ with Coal India to help it tide over shortages

* On completion of the banking period,CIL would return the coal to the power generation firms

* The power producer would earn revenue from the scheme until its project gets commissioned