Domestic blues of price-pooling

The recent approval by the Cabinet Committee on Economic Affairs to go ahead with price-pooling of domestic and imported coal is skewed decision that is unfavourably biased against the major coal-producing states of India, such as West Bengal, Odisha, Chattisgarh and even Andhra Pradesh. With the pooling mechanism coming into operation, only the new and independent power producers such as Tata, Reliance Power, Jaypee Group, GMR will be benefited as the the prices of imported coal, which these companies are heavily dependent on, will come down substantially, owing to the government’s effort at cross-subsidising the cost. Under the new system, these companies will be able to source imported coal from Coal India at prices significantly below the international level, thereby enabling them to reduce their revenue deficits and plug the holes in production by bringing down the cost of generating thermal power. However, the coal bearing states will be adversely affected because the domestic prices of coal mined in these states will shoot up exponentially, thus increasing the costs at their end steeply.

While price pooling is set to aid the power plants located in states like Gujarat and Rajasthan, which are farther away from coal mines, power units in West Bengal, Odisha, Chattisgarh, Andhra Pradesh, will take a big blow. Obviously, the added burden on the production side will be levied on the consumers whose electricity bill will be touching the sky in no time. The Power ministry, headed by Jyotiraditya Scindia, is serving the interests of the big corporate houses as mentioned above, who rely on imported coal, or interfere with the process of coal block allocation, instead of siding with state-run companies like the NTPC, which has stated explicitly that it is trying to bring down its reliance on imported coal. In addition, the surplus electricity tariff will impact the consumers negatively, especially because they are already grappling with record inflation and hiked prices of fuel and food items. This also disincentivises the increase in production of domestic coal, which, at present, is only a fraction of what it could be.