Govt move may hike coal price for paper and aluminium firms

The government is likely to withdraw core sector status from aluminium and paper segments, Prakash Chandra Parakh, secretary, department of coal, said Tuesday. Coal prices for aluminium and paper companies will go up if they are excluded from core sector.

"We are looking to take out aluminium and paper from the core sector since they strictly do not qualify as part of core sector," Parakh said.

"The price of coal for both the sectors is likely to go up if they are taken out (of core sector) but I cannot say how much," Parakh said.

This move will adversely affect aluminium companies like Hindalco Industries and National Aluminium Company Ltd that use coal to generate power for the smelting process.

Similarly, paper manufacturers like Ballarpur Industries Ltd, which use coal to generate power at captive power plants, will also take a hit.

Parakh, however, said there was no move to take out cement, iron, and steel industries from the core sector.

A senior official at Coal India Ltd, India's largest coal producer, said aluminium and paper manufacturers are currently sold coal in the range of Rs 500-1,600 per tonne, depending on the grade.

"If aluminium and paper sectors are shifted to the non-core sector, they will have to buy coal at the average e-auction price that varies month to month and colliery to colliery," the official said.

"The average e-auction price last month was 40-50 per cent higher (than that for the core sector) for various grades," the official said.

A spokesperson from Ballarpur Industries also said if paper was taken out of the core sector, the company would have to pay the e-auction price.

In 2004-05 (April-March), Coal India produced 323.64 million tonne of coal, which was 17.26 million tonne more than 2003-04.