Coal Banking System

A high level committee is being formed on the recommendation of the Planning Commission to explore the possibility of introducing a “Coal Banking System” in India. Planning Commission member BK Chaturvedi is expected to head the Committee. This seems similar to arrangements that are currently in existence for renewable energy and captive power plants where electricity is banked with the distribution companies. However, bigger beneficiaries of the concept are likely to be those which are setting up ultra mega power projects (UMPPs) that have operational coal blocks.

The proposal for coal banking was moved by the Association of Power Producers (APP). APP is a representative body of private power developers. It argued that the government should consider incentivising coal block owners to produce 100 MT annually. This would be needed in view of fast growing needs of the domestic power generation industry during the 12th Five Year Plan.

  • The Coal Bank proposal has been mooted by the Association of Power Producers, an umbrella body of private power generation companies
  • Under the scheme coal from captive mines of power developers would be ‘banked’ with Coal India to help it tide over shortages
  • On completion of the banking period, CIL would return the coal to the power generation firms
  • The power producer would earn revenue from the scheme until its project gets commissioned.

Proposed Methodology

  • Those power project developers who have no immediate requirement of the surplus coal they produce would be allowed to park their produce with CIL to help it meet its shortages.
  • Thus Coal India (CIL) can act as a bank for storing surplus coal produced from the captive mines of private power companies.
  • The coal so banked, would be returned to the companies once their power projects are commissioned. This return to the block owners would be as per a mutually agreed schedule.
  • The banking would not be for free. Instead CIL would make an “advance payment” during the banking period to the captive block holder.
  • However CIL can sell its coal to its customers and effectively recover the advance payment from them while also keeping some trading margins for coal supply.
  • After expiry of the banking period, CIL should hand over the coal to the block owners and should reimburse the incremental freight cost to their end-use plant to them.

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