Price pooling of coal - Report on 25th May

A committee under the chairmanship of the Central Electricity Authority (CEA) chairperson was set up earlier this month to look into the matter. The committee comprises officials from the power, coal and environment ministries, the Planning Commission and state government officials.

Pooling refers to the process in which domestic and international prices of material are averaged out to enable uniformity of rates for all consumers, irrespective of where they are sourcing the material from.

As reported the pooling of coal prices is likely to be based on the same price pooling principle adopted by the government for LNG. In the case of liquefied natural gas, the price of LNG sourced through long-term contracts at a cheaper price is pooled with the rates for more expensive LNG sourced from the spot market to ensure that consumers across the country avail of an uniform, average price.

The Power Ministry is exploring every opportunity possible to make coal available to companies at a low price so that electricity generation does not suffer and power tariffs are not driven up.

Coal Shortage throttles Power output for April

The country added record power capacity in the year ended March 31, expanding output by 15,795 Mw. More than 45% of this capacity addition is from private investors like Adani Power Ltd, Reliance Power Ltd and Tata Power Co. But the power output for the month of April is 8 percent less electricity than a state-mandated target amid a shortage of coal, as per the Central Electricity Authority . Electricity production from April 1 to April 29 was 63,655 million kilowatt-hours compared with a targeted 69,237 million, as per CEA report.

There were 28 coal-fired generators with fuel stockpiles at a “critical” level of less than seven days’ supply and 11 generators with a “super critical” level of less than four days’ inventory on April 28, according to the Central Electricity Authority. That compares with typical stocks of 25 to 30 days, the authority said.

A couple of days ago NTPC chairman denied any news of coal shortage and stated that the shortage is only a price related phenomenon as state distribution utilities are not ready to by costlier power. Stocks of infra and power sector companies are  already reeling under the hawkish credit policy released by the RBI to rein inflation. A fall in power output in the summer season which is supposed to be the season of peak demand does not give good encouragement to investors.