Government mulls plan to start coal banking system

Faced with a crippling shortage of domestic fuel and a prospect of rising import bill, the government is examining a proposal for coal banking from captive mines. The Planning Commission has been entrusted with the task of making a note on coal banking in consultation with concerned ministries; report CNBC-TV18’s Elan Gupta and Sumit Jha.

Also read: Coal India union suggests NLC model for divestment Proposal for coal banking The concept of coal banking was first proposed by private power producer body, association of power producer.  The Planning Commission, in consultation with the coal, power, and finance ministry will now be preparing a note on the specifications for the same. How will the coal banking work? Surplus coal exists where end user plants are not ready to fire. The idea is to mine the captive coal blocks even when the attached end user plant is not ready to operate due to delay. The coal thus mined would be used by Coal India Limited to cater to other operational end users facing fuel shortage. The end user with captive coal mine will receive the same quantum of coal from Coal India when it needs it. Tackling fuel shortage  “What we suggested is a concept of coal banking, where a captive user can produce coal but cannot use the coal. Let him produce coal, and give it to Coal India for banking purpose. It will then nominate another miner who has a project ready, but mine is not ready. That coal is returned to him in equal kcal value”, says Ashok Kumar Khurana, director general of Association of Power Producers. A meeting, attended by member (energy) of Planning Commission and concerned ministries on July 11, agreed to the mechanism in-principal. But participants also voiced several concerns related to the proposal. Legality of coal banking However, questions are raised over legality of such system under the Coal Mines Act 1974. Coal India has also raised the legal validity of the proposed banking activity. Meanwhile, finance ministry’s CEA wants to safeguard that coal banking remained a barter system and did not become an opportunity to trade for surplus coal from captive coal blocks. The CEA also said that such transaction in coal may mean a distortion in money value of supplied and received coal due to inflation. The idea of coal banking could alleviate some of the pressure faced by county's infrastructure due to domestic fuel shortage, but bringing this idea to reality will depend upon how well the government manages the concerns from its ministries.