State-owned Coal India Limited (CIL) is likely to increase the price of coal next month, following the increase in clean energy cess in the Budget and the recent increase in fuel price.
The CIL board is likely to take up the issue in the first week of August, when it would meet to consider the first quarter result.
Presenting Budget 2014-15, Finance Minister Arun Jaitley proposed to double the clean energy cess to Rs 100 a tonne. The cess has been levied on coal, peat and lignite since 2010 to fund and promote clean energy initiatives.
“This is a government decision and we will have to abide by it. This hike will be passed on to the consumers of coal,” a senior CIL official said. If the miner meets its offtake target of 520 million tonne (mt), CIL would have to shell out around Rs 5,200 crore on account of clean energy cess in the current financial year as against Rs 2,470 crore.
“Besides, there has been an increase in diesel prices as well. This, too, will be possibly factored in as and when CIL decides to revise coal prices,” the official said. Oil marketing companies have increased the diesel price by Rs 0.50 a litre, effective July 1.
According to Rupesh Sankhe, research analyst at Karvy Computershare, if the increase in cess and diesel prices are factored in, the coal price increase could be in the range of about Rs 80 a tonne.
In May 2013, CIL had reduced the prices of two premium coal varieties by 12 per cent and increased the prices of the rest by 10 per cent. This had resulted in an average increase of 4.7 per cent. Also, recently, the price of a certain grade of coal — produced from the Rajmahal mine of Eastern Coalfields — was increased to Rs 390 a tonne from Rs 300 a tonne.
Officials suggested while this cess and diesel price would be the trigger, the price hike is necessitated as the miner needs to improve its bottom line, which had been under pressure for successive quarters leading to increased costs and decline in e-auction realisations.
- Increase in clean energy cess and diesel price raise has necessitated the coal price increase
- In the Budget, Finance Minister Arun Jaitley proposed to double the clean energy cess to Rs 100 a tonnes
- This would make CIL shell out an additional Rs 2,730 crore. CIL to pass on the burden to customers
- Diesel price, also hiked by Rs 0.50 a litre with effect from July 1
- Analysts estimates if CIL decides to pass on hikes in clean energy cess and diesel prices, coal prices might go up by Rs 80 per tonne
- CIL board is likely to take a decision on price hike in the first week of August