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Gross calorific value to define coal pricing

BS Reporter  |  Kolkata 

Ltd, a Maharatna company, is set to usher in a new era of pricing by benchmarking coal on the basis of its gross calorific value (GCV) from the 2012 calendar year.

However, the transition to GCV pricing would be in phases, to assist sectors having huge discounts now. Among the major producers of coal globally, India is the only country that does not follow the GCV system. Thus, the move is expected to lead to a gradual rise in Indian coal prices to international levels.

“The coal ministry has directed us to gradually shift to GCV benchmark from January 1,” says CIL chairm an and managing director

“In a phased manner, the coal price would be at par with international pricing. Since our current average price is 30 to 60 per cent lower than the international prices, a sudden entry to GCV will affect the badly. Hence we are adopting it in phases.”

Currently, Indian coal is classified on the basis of UHV (useful heat value) into seven grades from A-G. UHV is based on ash and moisture contents for non-coking coals in line with the Centre directive. “Now,” notes Jha, “these seven grades have seven different prices. These grades are wide, while under the gross calorific value method, the bands would be narrower, closely resembling their quality.”

This means from January onwards, the Kolkata-based company will announce the GCV prices and the difference between exiting prices.

“If the GCV of a particular coal is higher, it will have higher price. If it is lower, it will have a lower price,” points out Jha.

“If the current price of a particular variety is lower than its GCV value, then it would be raised. On the other hand, of the existing price is higher, it would be reduced too. We are now studying how the gap between prices can be eliminated. The price will always be notified like now.”

The firm was trying to shift to GCV regime since the late 1990s, but it did not happen earlier due to protests from major sectors like power. Since the ’70s, the country is following UHV pricing.

Meanwhile, the firm’s foreign acquisition committeee is set to meet with in 10 days to study some proposals of acquiring stakes in unlisted firms.

First Published: Mon, November 14 2011. 00:26 IST