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Feb 20, 2013, 08.16 AM IST | Source: CNBC-TV18

Transmission of cost to end-user key to coal prices: IIFL

IIFL analyst Harshavardhan Dole says that the conclusion of the case-1 bidding and the new guidelines allowing generating companies to pass on costs to the end-user are key to the setting of coal prices. Dole tells CNBC-TV18 that he expects a decision regarding the pooling of prices to be announced soon.

IIFL analyst Harshavardhan Dole says that the conclusion of the case-1 bidding and the new guidelines allowing generating companies to pass on costs to the end-user are key to the setting of coal prices. Dole tells CNBC-TV18 that he expects a decision regarding the pooling of prices to be announced soon.

Below is the edited transcript of the analysis on CNBC-TV18

Q: Coal India has been losing for the last two days on reports that the coal ministry has actually acceded to the power ministry’s demand for a regulator who will be able to set prices of coal. Do you think this is advantageous for power companies?

A: With regards to coal prices, it is becoming increasingly critical how the new case-1 bidding will conclude and whether the guidelines will allow the generating companies to pass on the fuel costs to the end- level consumer- the distribution companies. I think that is the most important aspect to watch out for over the next three-to-six months rather than looking at absolute coal prices at this moment.

Q: What is your opinion on allegations regarding the Central Electricity Regulatory Commission's (CERC) decision being favourable for companies like Tata Power by ensuring a certain RoE?

A: The CERC is conducting public hearings before it arrives at a decision which should be announced soon. I will not be surprised to see a verdict over the next quarter.

Q: Regarding the price-pooling issue, all that the power, finance and coal ministers have stated is about presenting the Cabinet with a detailed plan. How long do you think the process will take and will it unclog the flow of fuel?

A: Though concerns were raised by sections of stakeholders regarding the increase in prices, it is vital that upcoming power projects produce power at the threshold plant load factor (PLF) to avoid huge risks in the banking sector. The ministries, at the moment, are more concerned about ensuring the banking system is not at risk while at the same time, catering to the interest of the consumer. To that extent, the pooling of coal prices is everyone’s concern.

Q: How long do you think it will take the government to arrive at a decision?

A: I was expecting some kind of an announcement. To that extent, yes, the deadlines have been extended. But over the next couple of months, it is certain that announcement should be made.

Q: Is this meeting a bit of a washout?

A: I wouldn’t say the meeting has been a disappointment because it is not known what has been deliberated and at what stages the discussion have reached. I will wait before reaching a conclusion.

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