Consumers of coal are facing the heat of coal price hikes for the third consecutive time in the last six months, since before the revision of coal prices in by Coal India (CIL) board, there were increases in royalty and clean energy cess, which pushed up coal prices by around 11% at the consumers’ end.
CIL announced an average 6.29% increase in the prices of coal across all grades, three years after it last revised its prices. But the Centre in December 2015 raised the royalty from 14% to 18.5% for funding the district mineral fund (DMF) and the National Mineral Exploration Trust (NEMT) and thereafter, in March, doubled the clean energy cess from R200 per tonne to R400 per tonne.
“The increase in royalty and cess already has an average 13 paise per unit additional impact on power production, the latest increase would impact an average of another 7 paise per unit, which means cost of power production will rise by an average 20 paise per unit,” Subhasri Chaudhuri, secretary general of Coal Consumers’ Association of India, said. According to a CIL statement, while the overall price hike is 6.2%, the effect on the regulated sector would be around 8%. For the non-regulated sector, it remains almost at the present level, with a slight tilt in favour of the consuming sector.
In the mechanism of rationalisation, the prices of G-1 to G-5 grades of coal have been reduced between 2% and 29% to make it competitive with international prices. The prices of G-6 to G-17 has been increased between 13% and 19%. Now, in view of the ensuing linkage auction, which would discover a market-acceptable price and trends in imports of coal and pet coke, the prevailing 35% mark up has been reduced to 20% for the non-regulated sector. But the prevailing add-on of 20% over the notified price for the regulated sector in the case of coal from Western Coalfields (WCL) has been continued. Also, to arrest the revenue loss of Eastern Coalfields (ECL) due to decrease in prices of higher grades coal, the CIL board has revised the prevailing add-on of R390 per tonne to R450 per tonne above the notified price for coal from Rajmahal mines.
However, this overall rationalisation would have a positive impact of R3,900 crore, while CIL coal would continued to be sold between 30% and 40% discounted rate compared with imported coal of similar calorific value, a CIL statement said.