The Hindu Business Line : Govt seeks to reclassify sectors for coal supplies

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New Delhi Feb 5 Important segments of the economy such as steel, cement, fertiliser, aluminium and paper industries may lose core sector status with respect to assured coal supplies through the existing linkage system if the Government plans fructify.

Only the power sector, which consumes more than 80 per cent of the coal produced in the country, is likely to continue as core sector.

According to official line of thinking, the power sector operates in a regulated environment where the cost at which it would sell power is determined by the Electricity Regulatory Commission and companies in this sector are not allowed to charge market determined prices from the consumers.

On the other hand, companies producing steel, cement, aluminium and paper, coming under core sector, are getting coal at Government-notified prices though they sell their products at market-determined prices, sources said.

An inter-Ministerial committee set up by the Ministry of Coal under the Coal Secretary, following the Supreme Court ban on e-auction of coal by Coal India in December 2006, is working on evolving a new distribution system for coal and is looking into the revision of existing classifications of coal users into core and non-core sectors.

Imports

However, the sources said that since coal supplied by Coal India to the steel and cement sectors are only in the range of 15-20 million tonnes each, as both the sectors already import a major portion of their requirements, the move is unlikely to have any significant impact on the end products of these industries.

Also, supplies to the aluminium and paper sectors through pre-determined linkages have virtually been done away with already.

In the case of fertiliser, though the selling prices are administered by the Government, coal consumption is insignificant.

Assured supply

Core sector consumers are given assured supplies of coal at Government-notified prices, while non-core sector consumers procure coal through the e-auction system.

After the Supreme Court banned e-auctions, Coal India introduced a system of e-booking as an interim arrangement, under which consumers are given coal on a first come, first served basis at 30 per cent above the notified price.

The committee is likely to submit its report by the end of April this year and has representations from the Ministries of Power, Steel, Industry, Railways and Law and the Planning Commission.