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The Indian government is looking at opening up coal mining to international competition with a proposal to price domestic output on a par with imports. The move is expected to the cost of power, but the plan comes with a built-in stabilization fund to cushion consumers from possible adverse impact.
The decision to examine the proposal was taken at an inter-ministerial meeting held last month and attended by finance secretary Arvind Mayaram, expenditure secretary Ratan Watal and coal secretary Sanjay Srivastava.
If the government has its way, the entire pricing mechanism for the fuel will undergo a change, and will be similar to the one used for petrol, diesel and cooking gas, where rates are adjusted periodically. Apart from international prices, changes in exchange rate will also have a bearing on domestic coal prices.
Well-placed sources said the idea behind the proposal is to boost output, incentivize efficiency, induce competition and attract large international mining companies who would help induct latest technology and best mining practices in the industry.
The other aim is to promote underground mining, which has less impact on the environment than open cast mining but requires higher degree of technological expertise.
The coal ministry was asked to examine the feasibility of implementing the import parity pricing on the model of revenue-sharing with the government. The ministry would now prepare a note to be discussed by a panel of secretaries.
Sources said, the import pricing should be examined with the provision of creating a separate kitty on the lines of price stabilization funds. The government’s revenue share could then be parked in this account and used to offset the higher fuel costs for producers. The proposal, however, is at a nascent stage and would require many rounds of discussions at various levels in the government before, if at all, the proposal becomes a policy.