CIL hikes prices after two years

Barely a week after Coal India (CIL) recorded a 20 per cent drop in profit before tax for the first half of this fiscal, the country’s largest coal miner on Thursday announced a much-waited upward revision in coal prices averaging 11 per cent.

The hike in prices, which comes after a gap of almost two years, will not only help the miner strengthen its fundamentals ahead of its planned initial public offering (IPO), but will also allow the firm to allay the damage caused due to salary and wage revisions as well as high input costs.

“These new prices should allow the company to add about Rs 4,500 crore to its coffers annually, and about Rs 2,500 crore this financial year. Also, the prospects of 33, so-far unviable projects, as well as many underground mines could be revived as a result of this hike,” CIL chairman Partha S Bhattacharyya said. Despite the increase, the cost of CIL-produced coal will remain substantially lower than international prices but will help the miner increase its profitability for this fiscal as almost 60 per cent of its annual production takes place in the second half of the year.

Bhattacharyya had said earlier that on a per calorie basis, Indian coal consumers were paying between 60-70 per cent less compared to international prices.

“There has been a substantial increase in the cost of inputs which has resulted in erosion of profitability to a large extent. After the deregulation of coal price, during the last nine years, the coal price in fact has effectively declined at 1.1 per annum, in real terms, after accounting for inflation,” a CIL press release said.

Moreover, according special treatment to two under-performing subsidiaries Eastern Coalfields Ltd (ECL) and Bharat Coking Coal Ltd (BCCL), the miner has increased the basic prices of run-of-mine (ROM) coal from these two arms by 15 per cent for all grades of coal.

Further, ECL has been authorised to set a special price for its high quality A and B grades of Raniganj coal, which are available in limited quantity, at a level commensurate with price of imported coal.

However, it remains that imported coal, which comes into the country after being rid of impurities, is superior in calorific value when compared to the unwashed ROM coal supplied by CIL.