Costly coal to pinch consumers

January 10, 2018

Coal India has raised thermal coal prices across certain grades effective from Tuesday. The move, which will inflate prices by an average of around 9 per cent, is expected to earn the miner Rs 1,956 crore on coal sales between January and March 2018 and Rs 6,421 crore annually from the next financial year.
The decision to raise thermal coal prices follows a levy of Rs 50 per tonne on coal evacuation introduced by the public sector miner last month, which will add Rs 800 crore to its topline in 2017-18 and Rs 2,500 crore every year from the next financial year.
In a filing to the BSE, Coal India has said its board of directors in a meeting on Monday has approved the increase in price applicable across all the subsidiaries of the miner for both the regulated and the non-regulated sectors.
It had hiked prices across all its subsidiaries for both the regulated and the non-regulated sectors by around 6.3 per cent in May 2016.
Coal India sources said the increase in prices was mostly on medium grades with gross calorific value ranging between 3,100 kcal/kg and 5,800 kcal/kg, while there has been a slight decrease in prices in both the upper grades (between 6,400 and 7,000 kcal/kg) and lower grades (between 2,200 and 3,100 kcal/kg).
he price hike will hit thermal power producers making generation costlier. According to Icra Ratings, this will result in an increase of 9 paise per unit for power purchasers.
"In turn, assuming the average AT&C loss level at around 23 per cent in the country, we estimate the impact on cost of power supply per unit sold and retail tariffs (assuming full pass through by state regulators) at around 11 paisa per unit," said Sabyasachi Majumdar, group head and senior vice-president, Icra.
Power producers, however, estimate a bigger impact of around 25-35 paise per unit at the retail level. "This increase along with earlier imposition of evacuation charge and increase in surface transportation charge would add about 35 paise in retail (power) tariff," Association of Power Producers director-general Ashok Khurana said.
The hike will also affect the non-regulated sectors, including cement, steel and fertilisers.
Stock surges
The Coal India scrip surged on Tuesday following the announcement of the revision in prices. On the Bombay Stock Exchange, Coal India shares ended the day at Rs 304.05 per share, up 5.63 per cent over the previous close.
Reference:

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