Coal India to raise prices 10%
23 Sep 2014
Coal India may raise prices of lower-grade coal, used to generate power, by a little over 10%...
Coal India may raise prices of lower-grade coal, used to generate power, by a little over 10%, a move that will help offset the fall in miner’s revenues from selling smaller volumes through e-auctions.
A CIL director said a proposal to rationalise prices of coal had been mooted by Eastern Coalfields (ECL), given the huge disparity in cost per kcal/kg between higher and lower grades of coal. The director said coal and power minister, Piyush Goyal, had, in principle, agreed to the idea of rationalising prices and CIL was awaiting a go-ahead.
Click here for graph
The price revision could be reviewed soon at a board meeting; while the board had earlier considered a hike of 10-12%, to compensate for smaller volumes sold through
e-auctions and higher freight, the raise had been held back. CIL has been asked by the Centre to
restrict sales via e-auctions to 5%
of total production—roughly 20-22 million tonnes — from 10%.
Realisations from e-auctions have been falling and are currently ruling at Rs 2,200/ton but the premium earned from such sales might go up with the quantity sold being lowered.
Meanwhile, the miner has reported disappointing production numbers so far in 2014—about 4.4% below the target. CIL ended FY2014 with a mere 1% growth in despatches missing targets and reporting a drop in profits of 13% y-o-y to Rs 15,000 crore The power and coal minister informed Parliament recently that approximately 52mt of coal capacity was behind schedule due to delays in land acquisition, and forest and environment clearances.
Subrata Chakravarty, ECL’s director technical explained to FE that coal prices across grades are “lopsided and there has to be a balance”. While price per kcal/kg works out to 70 paisa for higher grade of coal—say coal with GCV ( gross calorific value) ranging between 6,400 and 6,700 kcl/kg-- , price per kcal/kg works out to be 17 paisa for lower grades of coal – say coal with GCV ranging between 2,500 and 2,800 kcal/kg.
“Per kcal/kg should cost the same across all 17 GCV grades and automatically coal of higher GCV would cost more than coal of lower GCV. But at present there is disparity in pricing system and higher grades of coal with GCV of 5,800 kcal/ kg to GCV of 6,700 kcal/ kg and above are priced more than it should actually be. For this reason there are virtually no takers for higher grades,” Chakravarty said.
According to a coal ministry official, the ministry is open to the idea of a price rationalisation though the issue is yet to be taken up formally. He said the ministry has also agreed to increase the e-auction sales limit from 5% of the total production to 7% and is mulling re-visiting the scheme of price pooling of domestic and international coal. The ministry would, however, wait for the Supreme Court’s order on coal block allocation –expected later this month. He said it might be difficult for CIL to take a call on a price revision in the absence of 6 independent directors and a regular chairman and managing director on the board.
Source: The Financial Express