Two days after announcing crucial reforms that would impact the fate of India's power sector in the form of a gas price hike from USD 4.2 per unit to USD 5.61 per unit, it seems the Narendra Modi-led government is going for broke to pull the sector out from its current abyss.
A meeting of the Union Cabinet is under way in the capital where several critical but bold decisions related to the power sector are expected to be discussed, sources have told CNBC-TV18's Rituparna Bhuyan.
According to sources, some of the issues under discussion today include de-nationalization of coal, pooling of coal and gas prices and as well as direction on the fate of de-allocation coal blocks.
India's power sector has acutely failed to scale up production due to several issues: lack of increase in coal, which powers two-thirds of the country's power plants; inadequate production of natural gas, which powers a large chunk as well; and lack of investment due to irrational tariff structuring (governments holding back power companies to increase prices, commensurate with costs).
The big step to boost to power sector, according to analysts, would be coal denationalization.
Currently, only state-run companies can mine coal in India for commercial purposes, an effort led by Coal India, which has of late increasingly failed to meet its production targets. This has led to India becoming the world's third-largest coal importer despite sitting on its fifth largest reserves.
Since 1993, several private companies were allowed to mine coal but only for their end use such as power and steel production, but the decision was recently adjudged illegal by the Supreme Court -- for the ad-hoc manner in which they were handed out -- which de-allocated most of such blocks awarded since then.
Allowing commercial mining of coal would spur investment in the sector, bring in international miners with advanced technologies and spur production, according to experts.
The government is also expected to decide how it would auction the blocks that were cancelled by the Supreme Court.
Further, the Cabinet may also decide upon a framework to pool gas and coal prices. Currently, power plants that have domestic sourcing to gas or coal have a cheaper source for input while others rely on expensive imported coal or natural gas.
Pooling would result in a more equitable manner of pricing for all power plants, thereby viability prospects as well as production at many.
The Cabinet meeting is expected to end at 7.30 pm.
For more details on the meeting, watch the video.
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