New mines Act may fuel coal prices

The government today indicated that domestic coal prices could see an increase if profit-sharing arrangements in the proposed Mines and Minerals Development and Regulation (MMDR) Act were implemented.

The new MMDR Act proposes that either 26 per cent of profit generated by a firm operating the mine or 10 per cent of the royalty, whichever is higher, is to be given to people affected by the projects.

“There may be an increase in prices,” Coal Minister Sriprakash Jaiswal said when asked whether the profit-sharing measure could trigger a rise in coal prices in India.

State-run Coal India (CIL), which accounts for about 82 per cent of the coal output of the country, had last increased its prices in October last year, after a two-year gap. However, prices of coal in India, on a per calorie basis, continue to be lower than the international benchmarks.

While coal prices were de-regulated in 2000, the commodity prices are fixed by state-owned companies under the guidance of the coal ministry.

Jaiswal further said that in light of the “resentment” in major mining areas, there was a requirement to “take a major step to pacify” project-affected people.

“Coal pricing is a sensitive subject. However, proper pricing of energy is critical for sustaining the levels of production and growth of the industry and maintaining the competitiveness,” he added.

But CIL officials had earlier explained that the profit-sharing mechanism could entail an increase in prices of the fuel as the compensatory amount would have an impact on their balance-sheet.

Additionally, any increase in coal prices would also affect user industries including cement, power and steel, which account for about 72 per cent of the total coal demand in the country.

Last October, CIL increased the price of coal from Eastern Coalfields and Bharat Coking Coal by 15 per cent, while all other subsidiary companies were permitted a hike of 10 per cent.

Meanwhile, Jaiswal said that the new MMDR Act is likely to be cleared by the Cabinet in another month. “We are hopeful that it will be finalised in a month,” he said on the sidelines of an event organised by the Merchants’ Chamber of Commerce.