NEW DELHI :  In a move that could give a big impetus to the coal sector in the country, the government is considering implementation of import parity pricing for the black fuel, a source in direct knowledge of the matter told Cogencis.

In import parity pricing, the price charged for a domestically produced good is set equal to the domestic price of an equivalent imported good, which means the international price plus transport cost plus tariff. An inter-ministerial group that met on Jun 10 observed that coal mining in India was obsolete and lacked sufficient investment, and the coal ministry has been asked to prepare a note on the import parity pricing of the fuel, the source said.

The group observed that a move to implement import parity pricing for coal could dramatically increase the profitability of Coal India Limited and provide the company with enough cash to invest in expanding and modernizing its business.

The move is also seen as a precursor to permitting commercial mining of coal and make it financially attractive for the private sector. Finance Secretary Arvind Mayaram is understood to be a strong supporter of the idea, while Expenditure Secretary Ratan Watal raised concerns over implementation of import parity pricing of coal. Watal’s objections stem from the fact that major chunk of power production in the country is coal-based and such a move could push up cost of power, the source said.

The expenditure secretary is understood to be against the suggestion also because it may add to the subsidy burden of the exchequer as the government may have to subsidize power companies for higher cost of coal. According to the source, Mayaram suggested a price stabilization fund that could be used to offset the cost increase for power companies. The fund could be created by using a portion of the higher revenues which Coal India Ltd will get if import parity price is implemented, the source said.   -Cogencis

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