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CIL readies pricing strategy

Calcutta, Aug. 31: Coal India is working on the nitty-gritty of a price pooling mechanism for imported coal as part of supply agreements with power producers.

“The management is working on a business model for the price pooling mechanism,” chairman S. Narsing Rao said after the board meeting here today.

The state-owned miner had agreed to supply a minimum of 80 per cent of the annual contracted quantity under the fuel supply agreements (FSA) with power firms on the back of a government directive.

Of the committed 80 per cent, Coal India would supply 65 per cent of the requirement of power firms through domestic production and the remaining 15 per cent through imports.

Rao said the price of the 15 per cent imported coal could either be the normal cost price or pooled price. The board will work on a suitable business model in case of a pooled price mechanism.

Price pooling means a common price for domestic and imported coal on the basis of similar grade. The pooled price will be higher than the domestic price.

“The FSAs will be for 65 per cent domestic and 15 per cent imported coal, provided they are willing to accept it. Now, there are two options — either import and supply at the cost price or at a pooled price. If pooled price is implemented it will require a business model,” Rao said.

He said the nature of the tax impact and issues regarding invoice — whether it will be in the name of Coal India or the consumer — could feature in the business model. However, Rao did not give any time frame for the finalisation of the model.

Coal India will need to import an estimated 20 million tonnes this year to meet the demand of power companies. To offset the impact of high import costs, the Planning Commission had suggested that Coal India should adopt a pooling formula.

Though Coal India has inked fuel supply agreements with 29 power companies, leading producers such as NTPC and DVC are yet to sign the pacts.

 
 
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