CIL shifts to new coal pricing method

Coal India Ltd (CIL), the world’s largest producer of the item, has entered into a new price regime effective today, after its board of directors approved the plan on Friday.

It shifts to international pricing, 30 to 60 per cent higher than what the state-run firm’s average price used to be, by benchmarking coal on the basis of gross calorific value (GCV).

India was the only country, among major producers, not following the GCV system.
When asked about the impact on finances N C Jha, chairman and managing director of CIL, said, “There will surely be a positive impact. As far as prices are concerned, the result would be different on different subsidiaries; some will get more and some will get less. We will look into the impact on revenue after three months.”

The Kolkata-based major had been trying to shift to a GCV regime since the late 1990s but it did not happen earlier due to protests from major consumer sectors, such as power. UHV pricing is being followed since the 1970s.

Based on the new mechanism, there would be at least 17 slabs of 300 kilocalorie (kcal) bandwidth, starting from 2,200 kcal to 7,000 kcal, and above 7,000 kcal. Earlier, Indian coal was classified on the basis of Useful Heat Value (UHV) into seven grades, A to G. UHV is based on ash and moisture content for non-coking coals.

“The pricing of the present A and B grade coal would almost be the same, while E, D and C grade coal prices would increase slightly. F and G grades would almost be the same. For CIL, a majority of coal comes under the F and E category now,” Jha added. In the GCV regime, the bands are narrower, resembling their quality.

However, the company is to still maintain the differential pricing system and discounts. The discounts to customers would range from 25 per cent to 77 per cent, while it was 20 to 77 per cent in the earlier price regime.

“Hence, there will not be too much of impact for the power sector in the country,” he said.

Also, floor pricing for e-auction coal would not get reduced. “Earlier, the floor price was 30 per cent higher than the notified price, which has been reduced to 20 per cent now,” said the CMD.

Source By Business Standard (Date:02/01/2012 Time:11:49 IST)

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