The government is set to raise prices of A and B grade coal by 100% and increase prices of C to F grade of coal by 30%. A coal ministry official told FE that the CIL board decided to raise the prices on Friday and would notify the board on Saturday midnight.
This price increase, according to the official, would not apply to the independent power producers (IPPs) using grades of coal below B. But in case any IIP uses A and B grade coal, it would have to pay a higher price.Except for the IPPs and regulated sectors like the railways, the hike would be applicable to all sections, including the commercial power producers.
The last hike in coal prices was done in 2009 when the CIL had hiked prices by 11% across categories.This, according to CIL officials, would fetch an additional revenue of R4,467 crore in 2010-2011. However, this hike has been the steepest CIL has ever made and the company would get its impact just for a month this fiscal.
CIL chairman Partha Bhattacharyya after presenting the third quarter results this month said that a price increase was imminent since production growth has been restricted to a mere 2% against a target of 7-7.5% to end up producing 440 million tonne against a targeted production of 460 mt.
?This low growth in production,? he said, ?has to be compensated by a price increase, otherwise it would have a severe impact on the company?s profitability in 2011-2012 when CIL would have to pay an increased dearness allowance to its workers in July.?
Market observers felt that a price rise would take place in early April, but the government decided to go for it just before presenting the Budget.This would put the industry on tremendous pressure, observers felt.