KOLKATA (miningweekly.com) - Inter-Ministerial differences on the mandate of India's proposed coal sector regulator will result in the establishment of the Coal Regulatory Authority missing the March 31 deadline.

“Differences between the Coal and Power Ministries are yet to be reconciled. Both the Ministries have conflicting opinions on the powers that should be vested with the regulator,” a senior official in the Coal Ministry said.

“Clearly the Power Ministry want the regulator to have powers to protect the consumer or thermal power generating companies specifically while the Coal Ministry’s priority is to ensure flexibility for miners - Coal India Limited (CIL), particularly,” he said.

Some of the apparently intractable differences was over recommendations from the Power Ministry that the coal sector regulator be vested with powers to decide on coal pricing to prevent monopolistic pricing, with the Power Ministry arguing that the body should be empowered to adjudicate between coal miners and consumers such as thermal power companies.

However, this suggestion was unacceptable to the Coal Ministry, which maintained that price fixing by a regulator would be tantamount to an administered price regime, going against government’s stated policy paradigm of de-control.

Moreover, a coal price determined by a regulator based on the weighted average of domestic coal sales through e-auction and the price of imported coal on a free-on-board basis might not ensure an adequate internal rate of return for a miner like CIL, which often had to undertake projects in inhospitable conditions bearing huge social costs, the Coal Ministry argued.

In a counter-argument, the Power Ministry submitted that while power purchase agreements between thermal power producers and distributors, as well as fixed tarriffs for end-consumers, were regulated by provincial and federal electricity regulatory commissions, with weighting on the cost of feedstock, the coal sector, including its coal pricing, was not regulated by an independent authority.

“The recommendations on powers to be vested, as well as opposition to them, have all been placed before the group of Ministers set up to oversee the creation of the coal regulator. But it is unlikely that the contentious issues will be reconciled within the next two months for the regulatory body to be empowered through Parliamentary approval of the Coal Regulatory Authority Bill 2012,” the official said.