Coal news and updates

Coal India Ltd could have helped power companies save their production cost by 12%, or 35 paise a unit, if it had kept coal prices lower by using the money that it would pay as interim dividend, power sector executives said. 

 

The state-run monopoly coal supplier on Tuesday declared a dividend of Rs 29 a share. The central government, which holds 90% of the company, will get close to Rs 20,000 crore in the form of dividend and dividend distribution tax. CIL was forced to declare the hefty dividend as the government had to abort its plan to sell a 5% stake in the company because of opposition from labour unions. The stake sale could have helped the government raise about Rs 20,000 crore. 

 

According to CIL executives, the company is likely to pay about Rs 10,000 crore of the dividend from its profits this year and the rest from its reserves. 

 

CIL increased coal prices by a minimum 30% for all thermal coal used by power companies over the past three years, this executive said. "This enabled the company to increase its cash and bank balance from about Rs 45,000 crore during 2010-11 to Rs 62,000 crore in 2012-13," he said. 

 

Most of the additional reserves came from higher prices as production did not rise at the same pace. This fiscal year, the company is likely to miss its target on coal production by about 17 million tonnes and sales by some 15 million tonnes. 

 

"During 2013, CIL produced 417 million tonnes and would be giving away Rs 20,000 crore to the government as dividend and dividend distribution tax. This distributed evenly on the volume of coal produced last year would have led to savings of 35 paise per unit," a power sector executive said. According to a senior executive at a large public-sector power producer, India generated around 660 billion units of power last year, most of that using coal supplied by CIL. "Distributing the Rs 20,000 crore among the 660 billion units could have led to savings of about 35 paise too," this executive said. 

 

According to an executive from NTPC, the largest power producer, its fixed cost has increased only marginally in the past few years. "The increase in power tariff has been on variable cost due to a hike in fuel cost (coal), transportation cost and royalties," this executive said. 

 

"Power tariffs are regulated by Central and state regulatory commissions, however, coal prices are not. Every increase in coal prices leads to increased power generation costs which need to be passed on to consumers. This in turn leads to increase in railways tariffs as their cost in running rakes also goes up," he said.

 

 

Source: ET