CIL mulls increasing coal prices by 13% across grades

Coal India Ltd (CIL) has mulled raising coal prices by an average 13-13.5% across all grades, though the price of the lowest-grade coal between 2,200 and 2,500 GCV (gross calorific value) may be raised by 40-43%, a CIL director told FE on the condition of a

“The proposal of the price rise has been tabled at the level of the functional directors, but before that, there is already an in-principle approval from the coal and power ministries regarding increasing prices,” the director said.

A proposal of rationalising coal prices was mooted by Eastern Coalfields (ECL), given the huge disparity in cost per kcal/kg between higher and lower grades of coal. Although at one point of time the CIL board considered a 10-12% hike to compensate for loss in sales of smaller volumes through e-auctions, at present it is considering lowering the prices of higher grade coal but increasing the prices of lower grade coal.

While prices of coal with GCV band ranging between 6, 700 kcl/kg and 7,000 kcl/kg may be reduced by 23-25%, prices of coal with GCV band ranging between 2,200 kcl/kg and 2,500 kcl/kg may go up by 42-43%. There might be an average 17-18% decrease in the prices of higher grades of coal with GCV ranging between 7,000 kcl/kg and 6,400 kcl/kg, but there might be an average 21-22% rise in 13 grades of coal with GCV ranging between 6,100 kcl/kg to 2,200 kcl/kg, a CIL official said.

The maximum rise of 42-43% for coal with GCV between 2,500 kcl/kg and 2,200 kcl/kg is mostly used by the power sector and this is supposed to have a huge impact on the cost of power production.

Subrata Chakravarty, ECL’s former director, technical, earlier told FE that coal prices across grades were “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 ranging between 6,400 kcl/kg 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 kcl/kg 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 the 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.