Coal news and updates

Global coal price on the downslide

The sharp decline in the prices of coal to five-year low at $42.55 per tonne in the global market is unlikely to bring any cheer to the imported coal-based power producers. However, with cost of generation going down by as much as 35 per cent, the cases of compensatory tariff contested on basis of escalating global price of coal could stand invalid now.

The global coal futures are also at a 12-year low of $52.85 per tonne. "The power plants, which have short-term contracts for imported coal purchase, will make hay as the prices go down but for a brief spell. The plants with coal linkages and the ones with long-term purchase agreements of imported coal are unlikely to benefit from this downward trend," said a power market analyst in Delhi.

A drop of more than 30 per cent in coal prices brings down the cost of generation by 75 per cent. The cost of production will also not come down drastically as port and inland logistics cost has not come down. Also, the rupee has depreciated further.

Tata Power's ultra mega power project and Adani's 1,980 Mw plant, both based in Mundra, Gujarat, can look at their generation cost going below the compensatory tariff they were asking, owing to increased input cost. After the Indonesian coal prices were benchmarked with the international market price, Tata and Adani went on to appeal in the Central Electricity Regulatory Commission to grant them compensatory tariff as the input price increased. The case then went to the Supreme Court, which then sent it back to the Appellate Tribunal for Electricity for a fresh hearing.

Coal price in 2008 touched $130 per tonne. Since then, it has been sliding from $80 per tonne in December 2013 to $50 in December 2014. At an exchange rate of $66.65, the landing price of coal in India is in the price band of Rs 2,700 to Rs 3,000 per tonne.

source: http://www.business-standard.com