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Coal India chief says fuel price could be linked to inflation

Coal India Ltd may devise a mechanism where a hike in coal prices in the future could be linked to inflation or some other parameters to avoid sudden increases, its chairman and MD Pramod Agrawal told ET.

"We are devising a mechanism through which sudden increase etc. will be done away with and will be linked with parameters so that smooth price increase can happen in future," he said, adding that when this will happen has not been worked out yet.

Prices of domestic coal used for generating power have not been revised in the past five years. An increase in the fuel price directly impacts the power cost and is usually passed on to consumers.

For a price increase for the power sector, all stakeholders must come on board, he said.

"We will take a balanced approach taking stakeholders on board as an increase in coal price will have a cascading effect on various commodities. The aim is to protect our EBITDA and shield the nation from the impact," he said.

Last month, the state-owned company increased prices of higher grades of coal used mainly in industries like cement, fertilizer, and sponge iron. Coal prices for the power sector, where 78% of its production is sold, were untouched.

Coal price for the power sector is about 17% lower than what the other sectors are offered.

But volume sales also help in profit maximisation, Agrawal said, adding that since the company's fixed cost is high, any production increase has a good leverage for its bottom-line.