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.

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