Power producers seek clarity on CIL's price rollback

Power generating companies and coal traders have welcomed Coal India Limited (CIL)’s move to withdraw rise in coal prices. However, they have sought clarity on the rollback and on how the gross calorific value (GCV) mechanism would be cost-neutral.

CIL had raised coal prices under a new pricing mechanism, under which the prices were linked to the quality of coal. However, this was opposed by power, steel and cement firms.

The Maharashtra State Power Generation Company (MahaGenco) is expected to get annual relief of Rs 1,400 crore after the rollback in prices. Managing director Subrat Ratho told Business Standard, “On the basis of the GCV-based billing that coal companies had indicated to us in January, we had estimated there would be an additional burden of Rs 1,400 crore. Now, with the withdrawal of the price rise, we would like to know from coal companies whether the whole impact would be reversed or would there be a partial impact. As of now, there is no clarity.”

MahaGenco’s annual coal requirement is 36 million tonnes, which is procured by the state-run coal companies. The company imports about 3.5 million tonnes.

“Though under the GCV mechanism, prices are linked to the quality of coal, the reality is quite different. There is a need for joint sampling both by the coal companies and MahaGenco, as there is a huge difference between samplings at the time of loading and unloading,” Ratho said.

An Andhra Pradesh Generation Company (APGenco) official shared Ratho’s view on joint sampling, insisting the existing protocol in this regard be implemented. “Coal analysis and sampling should not be restricted merely to mining. It should be carried out at the receiving end as well….We will seek clarity on whether the rollback in prices would be restricted to F grade coal or to other grades as well,” he said.

Padmesh Gupta, chairman, Gupta Corporation, a company engaged in coal trading, said CIL’s decision to roll back the price rise was welcome. “However, the decision also shows the coal sector needs a regulator akin to that of the power sector. The regulator would regulate prices of coal according to coal production and generation.”

Power analyst D Radhakrishna also pitched for a regulatory mechanism for the sector. “The fact is Coal India wants trade parity, but there are problems in joint sampling and grade slippages,” he said.