Captive power producers have opposed Coal India's (CIL) move to shift to a new pricing mechanism for thermal coal with effect from January 1 as they feel it has increased prices of certain grades by up to 179%.
The new mechanism is based on Gross Calorific Value (GCV), under which prices are linked to the actual calorific value or quality of coal. The earlier mechanism was based on the Useful Heat Value (UHV) grading system, which deducted ash and moisture content from the standard formula.
"The switchover to GCV has lead to a steep increase in prices of coal, specifically in 'C', 'D' and 'E' grades of coal, by more than 100%, though it is claimed to be price neutral/marginal hike by CIL and Ministry of Coal," Indian Captive Power Producers Association (ICPPA) said in its representation to the government.
Demanding the withdrawal of the new mechanism, the ICPPA said, "The switchover would result in an increase of power cost by a minimum of Re 1 per KW/hour, which will have to be suffered by the common man."
Various companies in the aluminium, cement, steel, textiles sectors, among others, including the likes of Hindalco, Balco, Nalco and Orient Papers, are members of the ICPPA. Their captive power generation capacity varies from 1 MW to more than 1,500 MW.
According to the Central Electricity Authority, about 20,000 MW of captive power capacity in the country is connected to the national transmission grid.
Under UHV pricing, coal was categorised into seven grades. However, in the new GCV system, it has been divided into 17 grades and prices have been fixed accordingly.
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According to the ICPPA's calculations, the price of 'C' grade coal has risen between 140% and 179% due to the new mechanism as this grade of coal has been divided into two categories.
Similarly, the price of 'E' grade coal has gone up by 132%, while 'F' grade coal prices have risen between 35% and 95%, ICPPA calculations showed.
'E' and 'F' grade coal account for over 50% of Coal India's total production and are used mostly by power producers.
The ICPPA further said Coal India has "discriminated" against and segregated captive power producers (CPPs) from independent power producers (IPPs) and public sector companies by fixing a different price for CPPs.
"The discriminatory prices for CPPs as per the latest pricing circular of December 31, 2011, are as high as up to 60% over the pricing declared for IPPs and public utilities," it said, accusing Coal India of abusing its monopoly in the sector.
It added that the formulae adopted by CIL to arrive at the GCV prices and the consequent gradation lacked accuracy and transparency and there was no method of joint sampling and testing.