Coal India hikes low grade coal prices by upto 11%

The company also slashes premium quality prices by 12%

The world’s largest coal miner Coal India Ltd (CIL) today announced a major overhaul in prices across the 17 grades of its output. The state-owned monopoly increased prices of low grade coal by upto 11% and slashed prices of premium quality coal by 12%.

The price rationalization, coming ahead of a proposed mega share sale by the government in the company, would lead to an additional annual revenue realization of Rs 2,500 crore.

The company increased prices of lowest grade (G17) coal, with Gross Calorific Value (GCV) between 2,200 Kilocalories per Kilogram (Kcal per Kg) and 2,500 Kcal per Kg, by 11.1% from existing Rs 360 per tonne to Rs 400 per tonne.

Prices of Grade 6 coal, with GCV between 5,500 and 5,800 Kcal per Kg, were increased 10.3% from Rs 1,450 per tonne to Rs 1,600 per tonne. The lower grade coal is primarily used by power generation companies.

Consumers appeared severely miffed at the price hike. “This price hike will increase the current power generation cost of around Rs 2.8 per unit by 10-12 paisa per unit. Nobody can justify this price hike announced by the monopoly producer as there is no standard for comparison. Also, there is no regulator to verify the need for the hike. The hike has been done through a system of opacity,” Ashok Khurana, Director General of Association of Power Producers (APP) said.

Khurana also raised objection over CIL’s move to slash prices for higher grades. “High grade prices have been decreased as global prices have come down. Is the imported coal price a benchmark for rationalizing domestic prices? If cost of production has come down, it must have come down for all the grades,” he said.

The high grade coal is used largely by cement and sponge iron companies. Consumers of high grade coal had started refusing purchases arguing prices had exceeded international benchmarks. Premium quality coal of A and B grades accounts for around 18% of CIL’s output.

CIL has increased prices five times since prices were deregulated in 2000. The last price hike of January 2012 made domestic coal dearer by an average 12.5% over the price of Rs 1,600 per tonne prevailing then.

This pushed the price of highest quality CIL coal – with calorific value between 6,700 and 7,000 Kilocalorie per Kilogram -- to Rs 4,900 per tonne. Following protests, the price was brought down marginally to Rs 4,870 per tonne a month later. For supplying coal with quality exceeding 7,000 Kcal, CIL charges additional Rs 150 per tonne over this rate.