Coal prices may rise 15% on quality improvement

Buyers from the power sector which have fuel supply agreements with Coal India, will benefit from the move

Coal customers would soon have to pay 15-20% more as Coal India has decided to supply only crushed coal. In an attempt to improve quality, the coal monolith has planned for massive expansion of washeries.

“The crushing process not only reduces the coal size to be shipped but also removes stones. There will be minimal chances of grade slippages once we start supplying 100 per cent crushed coal,” a senior Coal India official told Business Standard.

Buyers from power sector, like NTPC, which have fuel supply agreements (FSA) with Coal India, will benefit from the move. However, procurement cost for such companies may rise marginally. “Coal cost will marginally increase on account of crushing charges,” an NTPC official said.
 

Other related costs involved in handling of big sized coal, filtration of boulders, break-downs arising from presence of stones, demurrage and others will reduce. “On overall basis, no major impact is expected, except gaining in coal quality,” the official said.

Coal India will set up three washeries with a total capacity of 11.6 mt in Jharkhand by the end of this year. Another 12 washeries are likely to be commissioned by September 2017 to ensure supply coal above clean grade 10. These will expand Coal India’s annual washing capacity from the existing 36.8 million tonne (mt) to 112.6 mt.

“Coal prices may rise by 15-20 per cent as Coal India will not entirely absorb the cost of the additional washeries,” said Amol Kotwal, director of the energy and environment practice at Frost and Sullivan. The present washing cost of coal is about Rs 200 per tonne.

Nine of the 15 washeries planned, with joint capacity of 94 mt per year, will be in non-coking coal category. Rest, with 18.6 mt capacity, will be in the coking category. Currently, the world’s largest coal miner has 15 washeries — 12 in coking and three in non-coking coal segments — with a cumulative washing capacity of 36.8 mt every year.

The coal ministry has also introduced new rules for third party sampling to address quality issues between the miner and power companies. The decision to focus on quality by building additional washeries and ensuring 100 per cent crushed coal follows the ministerial objective to ensure “power for all by 2019” as better quality coal will ensure higher electricity generation.