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Coal prices hiked by Coal India

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Coal India has raised prices by 6.29 per cent across all its subsidiaries for both the regulated and non-regulated sectors.

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The higher prices will enable the company earn an additional revenue of Rs 3,234 crore in 2016-17, but will increase the raw material cost for sectors such as power, iron and steel and cement.

Coal India, which held its board meeting on Saturday, informed the BSE about the revised prices on Sunday morning. The higher prices will be effective from May 30. “This will be applicable to all subsidiaries of Coal India Ltd and NEC (North Eastern Coalfields) for regulated and non-regulated sectors,” the public sector firm informed the BSE.

“The board has also approved the differential price for non-regulated sector at a reduced rate of 20 per cent over the price of regulated sector for G6 to G17 grades of coal for all subsidiaries of CIL,” the miner said. Earlier, this gap used to be around 35 per cent.

At present, Coal India offers 17 grades of non-coking coal with the gross calorific value (GCV) ranging between 2200 and over 7000 kilo calorie per kg.

“The power industry was not expecting this hike to come in at a time demand is not increasing. It is surprising that they (Coal India) decided to increase the price even as their offtake is not growing significantly. Coal being a pass-through component in the variable cost of power, tariffs are expected to go up following this hike,” said Ashok Khurana, director-general of the Association of Power Producers.

According to industry sources, the variable cost of power per unit will go up depending on the grade of coal consumed by the power plant. For a power producer using G5 grade of coal (GCV range between 5800 and 6100 kcal/kg), the unit cost may go up by around 12-14 paise.

“Coal prices have already gone up following the announcement of a clean environment cess of Rs 400 per tonne in the Union budget. The impact on tariff on account of this cess is estimated at around 33 paise per unit. This price hike will further push tariff upwards,” said a senior official of a public sector thermal power producer.

For Coal India, the price hike comes at a time its average realisation per tonne is going down because of the lack of demand, especially from power plants, which are flush with coal with an all-India average stock of 22 days as on May 26. Coal India sources said the miner was also expecting a revision in wages soon, adding to its overall expenses.

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