New Delhi, Aug. 30: The committee on integrated energy policy has recommended free pricing of petroleum products and greater competition in the coal sector through a thrust on imports.

The report suggests opening up of the petroleum sector through full price competition at the refinery gate and at the retail level. It says the government continues to control the prices of automotive fuels, LPG, natural gas and PDS kerosene, despite dismantling the administrative price regime in 2002.

“If international oil prices keep going up, subsidies will be unsustainable. Consumers by and large do not realise how much they are subsidised. There is a need to create awareness,” Planning Commission deputy chairman Montek Singh Ahluwalia said at the release of the report.

Identifying coal as the main source of energy, the report says domestic production can be raised by allocating coal blocks to central and state public sector units and to captive consumers.

The committee has suggested strengthening the infrastructure for imports to make the domestic coal industry sit up and take note of the pressures of competition. It also proposed a consensus on the coal mines nationalisation Act. The committee has linked natural gas prices to coal. The report proposes free trade in coal.

It says that the cost of generating peak or base electricity using natural gas cannot exceed the cost of peak or base electricity from coal which is the cheapest alternative. A competitive coal market is important for setting a proper price of natural gas on a net-back basis, the report adds.

The panel’s prescription for the power sector is on cutting transmission losses through a recast of the accelerated power development and reforms programme. Other measures in this regard include an efficient inter-state and intra-state transmission system and rehabilitation of thermal and hydro stations.

To cut power costs, the panel proposes setting up of generation and transmission projects on the basis of tariff-based bidding. The tariff should be fixed on return on equity or on return on capital invested in the project. Introduction of “time of the day tariffs” and standardisation of unit sizes have also been suggested.

Smart cards for the poor

The energy panel has proposed the use of smart cards to give subsidy to the poor on LPG, kerosene and electricity.

The credit cards will be for entitlements of 30 units of power and 6 kg of cooking gas or equivalent amount of kerosene to cover one or both needs.

The panel said, “A system of debit cards or smart cards may be introduced whereby the targeted households get a credit of different amounts of cash for the purchase of these entitlements. The available credit on the cards can only be used for the purchase of these entitlements.”