Review pass through policy for coal import: Govt told

A Parliamentary panel today asked the government to review the mechanism in the coal price policy, saying the method makes private power companies main beneficiaries at the cost of consumers interest.

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The panel's recommendations come barely a couple of months after the government allowed power companies to pass on cost of imported coal to consumers, a move that is likely to raise electricity tariff. "This decision (nod to pass through mechanism) of the government is likely to increase electricity tariffs further," the Standing Committee on Coal and Steel, headed by Kalyan Banerjee, said in its report tabled in Parliament. "The committee are perturbed to note that the decision will only help the power companies, especially the private sector, who will be the main beneficiary of the decision as they will not pass on benefits to the consumers," it said.

The panel said the interests of the consumers have thus been ignored and an additional burden on higher coal price subsequently resulting in higher electricity tariffs have been put on them. "Review this new coal price policy in the interest of consumers so as not to pass this additional burden on them," it said. The panel said that it has been apprised that the new coal price policy approved by the government allows power companies to pass on burden on expensive coal to consumers.

"To meet its balance fuel supply agreement (FSA) with power companies, CIL may import coal and supply the same to the willing thermal power plants on cost plus basis," it said. Under the pass through mechanism, the entire additional cost of imported coal would be passed on to consumers as against averaging of prices of imported and domestic coal under the earlier planned price pooling mechanism. The Cabinet in June last year had approved the pass through mechanism, which is said to hike the electricity tariff by 15-17 paise per unit. 

The Cabinet Committee on Economic Affairs had approved the proposal to boost power generation by using imported coal as domestic output falls short of demand, triggering power cuts in several places. "There will be small increase in power tariff. It will be very marginal increase on unit cost of power depending upon the cost of import of coal...There is a famous saying that no power is costlier than no power. The choice is pay more for electricity or you don't get electricity at all," Finance Minister P Chidambaram had said.

Power producers before this mechanism was approved were not allowed to fully pass on the cost of expensive coal imports they resorted to for meeting shortfalls from domestic mines.