CIL announces major pricing policy overhaul

The company hikes low grade coal prices by up to 11%

Coal India Ltd (CIL) today announced a major overhaul in prices across the 17 grades of its output, increasing prices of low-grade coal by upto 11 per cent and slashing these of premium-quality coal by 12 per cent.

The company increased prices of the lowest-grade or G17 coal, with a Gross calorific Value (GCV) between 2,200 Kcal a kg and 2,500 Kcal a Kg, by 11.1 per cent from existing Rs 360 per tonne to Rs 400 per tonne. Prices of Grade 6 coal, with GCV between 5,500 and 5,800 Kcal Kg, were increased 10.3 per cent from Rs 1,450 a tonne to Rs 1,600 a tonne.

The price rationalisation, coming ahead of a proposed mega share sale by the government in the company, would lead to an additional annual revenue realisation of Rs 2,500 crore. Lower grade coal is primarily used by power generation companies. On the other hand, high grade coal is used largely by cement and sponge iron companies. Consumers appeared severely miffed at both, the price hike as well as slashing prices for higher grades of coal.

"This price hike will increase the current power generation cost of around Rs 2.8 a unit by 10-12 paisa per unit. Nobody can justify this price hike announced by the monopoly producer as there is no standard for comparison. Also, there is no regulator to verify the need for the hike. The hike has been done through a system of opacity," said Ashok Khurana, Director General of the Association of Power Producers.

On the slashing of prices, Khurana said, "High grade prices have been decreased as global prices have come down.

Is the imported coal price a benchmark for rationalising domestic prices? If cost of production has come down, it must have come down for all the grades."

Consumers of high grade coal had started refusing purchases arguing prices had exceeded international benchmarks.

Premium quality coal of the A and B grades accounts for around 18 per cent of CIL's output.

CIL has increased prices five times since prices were deregulated in 2000. The last price hike of January 2012 made domestic coal dearer by an average 12.5 per cent over the price of Rs 1,600 per tonne prevailing then. This pushed the price of highest quality CIL coal with a calorific value between 6,700 and 7,000 Kilocalorie a kg to Rs 4,900 a tonne.

Following protests, the price was brought down marginally to Rs 4,870 per tonne a month later. For supplying coal with quality exceeding 7,000 Kcal, CIL charges additional Rs 150 per tonne over this rate.