Coal prices hiked 16% after 2 years

Move to add Rs 4,000 crore to Coal India's topline.

After a gap of two years, Coal India Ltd yesterday announced an average price hike of 16.7 per cent for all grades of coal sold in the domestic market to bring its selling prices closer to the international rates.

The average price hike of 16 per cent would add more than Rs 4,000 crore to the topline of Coal India. The topline growth was likely to be higher if Coal India achieved its target of 4-5 per cent growth in volumes over the 2003-04 tonnage.

Coal India Chairman S Kumar said that even after this hike, the company's coking coal prices would be Rs 850 per tonne lower than the landed price of imported coal.

Coal accounted for more than 60 per cent of the country's energy requirement annually and most power, steel and cement plants would continue to be totally dependent on coal in the near future.

Coal India sold 304 million tonnes of coal in 2003-04 and earned a revenue of Rs 26,700 crore exclusively from coal sales, indicating a per tonne selling price of Rs 878.

The price revision would vary across coal grades. On top-end grades, which represents about 1 million tonne of sales, the increase would be 50 per cent.

In medium grades, representing about 18 million tonnes, the hike was 20-30 per cent on existing prices.

In defence, Kumar pointed out that between August 2002 and June 2004, international prices of like-to-like grades of coal had gone up by 100 per cent.

For example, non-coking coal prices in the international market had doubled. Coal India would, however, raise prices by only about 20 per cent on about 65 million tonnes of prime coal, which represents 22 per cent of its total production in 2002-03. On a quantity of about 207 million tonnes, representing 71 per cent of its production, the increase was about 15 per cent.

Coal India produced a record 306.38 million tonnes of coal in 2003-04 and despatched 304.29 million tonnes.

Power utilities were its principal client group, buying 233.55 million tonnes of coal. This was 13.46 million tonnes more than the volume of coal purchased by power plants in 2002-03.

Sales in fiscal 2003-04 rose more than 8 per cent to Rs 26,700 crore, helping the company register a profit before tax of Rs 3700 crore, up 30 per cent over the previous fiscal. The higher profit was achieved after paying 15 per cent of basic wages as interim relief to its 5-lakh plus workers from January 1, 2004.

Rebutting criticism that it was not producing enough coal, Kumar pointed out that as on June 1, 2004, only 18 power plants had low coal stocks, against 24 plants in March 2004. This was because coal production had shot up 7 per cent in April and May, to 52.43 million tonnes.

Kumar said that Coal India aims to produce 350 million tonnes by fiscal 2006-07 through an additional capacity of 77 mines, for which approvals have been sought.

Kumar said the company could internally fund these projects which would require investments of around Rs 14,310 crore. By 2011-12, its production target was 445 mntpa at an investment of Rs 19,000 crore.

Even if Coal India and other companies achieve these targets, the gap between domestic supply and demand would be 55 million tonnes in 2006-07 and 95 million tonnes in 2011-12.