CIL revises prices upwards, power cost likely to increase

State-run miner Coal India (CIL) has raised the prices of different varieties of coal by a weighted average of 6.29%. This is likely to increase the cost of coal-based power by 5-6 paise per unit as the company sells nearly 70% of its produce to power producers.

The increase in coal price would offset the expected price advantage to consumers from the proposed cut in coal royalty to 11% from 14%.

The price revision will see higher grade of coal (G1 to G5) become cheaper by 2%-29% while the rates of lower grade of coal (G6-G17) would climb by 13%-19%. The changes in rates would be applicable from Monday.

“This has been done keeping in view the proposed increase in cost of price index, wholesale price index, forthcoming increase in wage revision and operational expenditure,” CIL said in a statement. It added that CIL will earn an additional revenue of nearly Rs.3,234 crore for the balance period of FY 17.

Coal India officials said that revision was aimed at achieving twin objectives of stimulating demand for higher grade of coal while ensuring that the extra revenue from lower grade of coal would cover the anticipated rise in cost for the company in the form of higher wages. Coal India revises wages for non-executive staff every five years after negotiations with worker unions. The next revision is due on July 1.

The company said that the consumers of lower grade of coal would continue to favour the domestic coal over imported coal option as even after price revision CIL coal will continue to enjoy discount in the range of 30%-40% in lower grades in comparison to imported coal of similar calorific value. It also said that it was reducing the premium charges to non-power sector like cement, aluminum and steel to 20% from 35% earlier. These sectors typically use higher grade coal.

“It is to be noted that in the last three years consumer-end price has increased due to increase in rail and road transportation cost, cess and excise duties but CIL prices stagnated at less than 30% of the consumer-end prices,” the company said.