Plan panel for independent coal regulator

Arguing that a competitive free market can efficiently determine coal prices, the Planning Commission has renewed its pitch for setting up an independent regulator for ensuring free and fair competition in the sector. It has further suggested that at least 20 per cent of the total coal production be sold through an e-auction while the remaining coal be sold under long-term fuel supply agreements.

In a background paper prepared for the Economic Editors’ Conference, the plan panel observed, “Coal prices should ideally be left to the market and trading of coal nationally and internationally should be free as only a competitive free market can do an efficient job of price determination. Pending the creation of such a competitive market, independent regulation of coal prices becomes essential for developing a competitive market.” The ministry is also finalising the blueprint for the proposed regulator in the form of a legislation christened Coal Regulatory Authority Bill, 2008 that is likely to be tabled in the Parliament. The said regulator will mainly look at the aspects of price determination, implying that coal prices would be regulated and Fuel Supply Agreements (FSAs) and disputes pertaining to them would be monitored. It will also have a substantive say in recommending de-allocation of those coal blocks idling despite being allocated years ago.

The Integrated Energy Policy envisages restructuring the coal sector and facilitating private sector participation in commercial coal mining by means of necessary legislative amendments, allocation of coal blocks for exploration and mining on a competitive basis to the private sector, enhancing exploration capacity, besides setting up a regulatory mechanism for ensuring a level playing field in each segment of the coal production and supply chain.

Making it clear that coal would be the mainstay in the energy mix, the Commission pointed out that India’s coal requirement will have to expand from around 420 million tonnes in 2003-04 to 2-3 billion tonnes annually based on domestic availability of coal. “It is suggested that 20 per cent of the coal production may be sold through e-auction. Remaining coal should be under long term fuel supply and transport agreements,” it suggested.

State-run steel giant Coal India Lmited (CIL) achieved a production level of 379.49 million tonnes in 2007-08, which is 5.1 per cent higher over the previous year. The 11th Plan projections for the coal sector has placed onerous responsibility on CIL. The PSU is expected to produce 520.5 million tonnes in the terminal year of Plan period (2011-12) up from a level of 360.9 million tonnes achieved in 2006-07, coal ministry sources said.