Reliance and Tata seek govt help on imported coal price

Wed, June22, 2011 | PTI


NEW DELHI: Private power producers, including Reliance and Tata, have sought the government intervention to tackle the possible spurt in imported coal prices, apparently making a case for increase in power tariff for consumers.

The plea of the private power utilities comes at a time when Indonesia's -- the largest coal supplier to India -- mining laws are making it mandatory that coal prices be based on international market rate.

In a letter to Power Secretary P Uma Shankar, the 14-member Association of Power Producers (APP) has called for setting up of an "expert committee" to find an appropriate solution to price issues related to imported coal.

Apart from Reliance Power and Tata Power, other association members include Essar Power , Adani Power, GMR Energy and Jindal Power.

Many private utilities have won projects via competitive tariff-bidding route and the imported coal supply was based on bilateral agreements with fuel suppliers, mainly from Indonesia.

"Current contractual framework does not protect power companies from coal price changes triggered by any 'change in law' event in the coal exporting country," the letter written by AAP Director General Ashok Khurana said.

Similarly, Australia is planning to collect taxes on general additional revenues from exports of coal and iron ore as well as impose carbon tax on Australian coal production.

According to the letter, these laws would push coal prices by USD 20-25 per tonne.

India imports about 50 per cent of its imported coal from Indonesia and around five per cent from Australia.

The letter has said that there should be a suitable tariff structure that would "allow pass through of fuel prices to the power purchasers".

Out of the 43,000 MW capacity worth power projects awarded through competitive bidding, about 13,000 MW generation is dependent on imported coal.

Power project developers should get protection in the power purchase contracts for coal price changes triggered by legal and regulatory changes in coal exporting nations, the letter said.

The utilisation of imported coal is expected to rise in the coming years, especially since domestic coal production has slowed down mainly on account of environmental issues.

India is expected to see a capacity addition of 80,000 MW in the 12th five-year plan period (2012-17), with majority of contribution from private power utilities. (sourced ET)