An inter-ministerial note on coal price pooling calls for introducing pass-through mechanism in order to ensure that the price charged from electricity distribution companies reflects the rising cost of coal.

The note suggests that the power ministry would work on guidelines to help regulators to develop a pass-through mechanism for imported coal, which will form part of the fuel supply agreements signed by new large power plants.

The new initiative will enable private entrepreneurs setting up power plants of 7,000-8,000 mw capacity to get a better price for their electricity.

Government sources indicate that this formula will only impact the tariff of those electricity plants which have already signed power purchase deals through a competitive bidding process.

The government has introduced this mechanism in order to minimise the impact of coal price pooling. Under coal price pooling, electricity prices for all producers will go up, adding to the burden of end-users.

Most states, including Bengal and Odisha, are opposed to price pooling of coal supplied to them by state-run Coal India with the imported variety that will be brought in for new power plants being set up by big entities such as Reliance, the Tatas and the Adanis.