CIL needs to up prices to offset imported coal cost

Written by Noor Mohammad | Noor Mohammad | New Delhi | Updated: Nov 21 2012, 07:46am hrs
Coal India will need to increase domestic coal price by 8-21% during the current 12th Five-Year Plan to offset the impact of the high cost of coal that it may have to import to meet at least 80% of the fuel requirement of power companies as per contractual terms.

The company, which is struggling to step up production to meet the power sectors fuel demand, has projected coal import requirement at 18 million tonnes (mt) in the current year (2012-13), 45 mt in 2013-14, 38 mt in 2014-15 and 19 mt in 2015-16. But it expects to be able to meet the power sectors fuel demand from indigenous production alone in 2016-17.

The company will be required to increase its coal price by 8% in 2012-13, 21% in 2013-14, 16% in 2014-15 and 7% in 2015-16 to absorb the impact of the high cost of imported coal, CIL had said in a recent letter to the coal ministry.

These projections have been drawn based on the assumption that CIL will be able to achieve 8% compounded annual growth rate (CAGR) in production during the current Plan period, compared with the 3.8% recorded in the previous Plan period. CIL will have one notified price for each grade of coal under the proposed price pooling regime despite the necessity of importing coal.

The principal secretary to the PM, Pulok Chatterjee, is steering the effort to devise a price pooling mechanism to help CIL pass through the high cost of imported coal evenly across the power sector. Though the initiative is being pushed to enable CIL to meet its fuel comitmments to the consumers, the proposal has met with stiff resistance from certain state governments who fear that move would increase cost of power generation and thereby impact electricity tariff. CIL has indicated that price pooling could not be done in isolation and all consumers need to give their accent before the new system could be started.