India revives coal sector regulator proposal

4th june 2018

With the auction of coal blocks for commercial mining scheduled for next month, the Indian government has revived a proposal to set up a coal sector regulator.

The Coal Ministry has already announced rules for the auction and is in the final stages of drawing up a list of coal blocks that will be offered to private miners to produce without any end-use restrictions and ushering in an end to the nationalization of coal mining since 1974.

With the advent of private miners in the country, the Coal Ministry has revived the years-old plan of setting up an independent coal sector regulator to arbitrate between private coal producers, government coal mining companies and consumers, in line with the model followed in the telecommunications sector, which is regulated by the Telecom Regulatory Authority of India and sees airwaves auctioned by government.

Government officials said that while the contours of a coal sector regulator already existed when such a body was first mooted years ago, the critical issue that was yet to be decided was whether the sector regulator would be empowered on pricing of the dry fuel.

The officials said that while coal mining had been opened up for private mining, offering investors free pricing for production and no end-use restrictions, the government would have to take a call on whether, as in the case of the telecommunications regulator, successful bidders at the auction would be permitted to set a price and submit it to the regulator for approval with the latter also the final arbitrator in the case of complaints of predatory pricing.

The government as things stands, favoured vesting the regulator with some price monitoring authority to avoid issues between various miners, government mining companies or user industries moving directly to the courts in absence of an intermediary settlement authority, the officials added.

A regulatory authority is also considered critical for private miners to adopt a pricing mechanism based on energy content of coal, against a grade-wise pricing regime currently in vogue with government coal companies.

Disputes over grades, and boulders and stones in coal consignments have been vexed issues between power companies, and coal miners and with more players coming into the industry, the government reckons the issue of quality has to be put under the mandate of an independent regulator.

Significantly, readying for opening up of coal mining by private miners, Coal India Limited is currently seeking stakeholders’ views on moving to gross calorific value-based pricing moving away from a grade-wise pricing formula.

Source: CREAMER MEDIA’S MINING WEEKLY