Bhattacharya further added that if price of domestic coal goes up, it is likely to impact most power stations that do not require imported coal. "There are so many power stations in the country which are dependent only on domestic coal. They will have to suddenly face a price hike of domestic coal because some power stations will have to be provided coal at a cheaper than cost price. So this may have a little bit of a legal issue which needs to be plugged while the scheme is designed," he explained.
Here is the edited transcript of the interview on CNBC-TV18.
Q: CCEA gave its in-principle nod for pooling of prices to bridge the 60,000 MW coal deficit. Logistically, how will this work? Coal India will be responsible for importing this. You are quite sure that the P&L of Coal India itself will remain unaffected.
A: I have just gone through the Press Information Bureau (PIB) note on this. It says that it will be revenue neutral for Coal India, which means that their P&L should be unaffected. But, at the same time, I think the details would be known only when the proposal is finalized. It is being worked out between the Cabinet Committee on Economic Affairs (CCEA) and Coal India.
So once it is finalized, more clarity will come out of this. There are a couple of issues that need to be taken care of. First of all, I would say that imported coal and domestic coal are different from a quality point of view. Since we do not wash our domestic coal, we supply it on a mined basis, so the variability of Gross Calorific Value (GCV) is very high. Imported coal is normally washed and therefore the variability is much lower.
Let us say, if you take coal of the same GCV, for example 4000 kilocalories and a variability of plus-minus 10 percent, it makes a very different product as compared to a variability of plus-minus 2-3 percent. So that factor will have to be also taken into account while doing this pricing. The other point is that in any case there will be power stations who will have to pay more for using the same domestic coal because some other power station has to be supplied imported coal at a lower than cost price.
There could be some legal implications of this which needs to be properly handled and I am quite sure that the government, when they formulate the scheme, will tie up all these points and it will be properly guarded. But, these are issues that need to be taken care of.
Q: Will the impact be on companies like National Thermal Power Corporation (NTPC) which have had long-term Fuel Supply Agreement (FSA) with Coal India?
A: If domestic coal prices go up, it is going to impact everybody, particularly power stations who are not required to take imported coal at all. There are so many power stations in the country which are dependent only on domestic coal. They will have to suddenly face a price hike of domestic coal because some power stations will have to be provided coal at a cheaper than cost price. So this may have a little bit of a legal issue which needs to be plugged while the scheme is designed.
More to come.
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