Coal India roll backs hike in coal prices

Prices linked to calorific value or quality of coal

PTI | January 31, 2012



Coal India Ltd (CIL) today rolled back the hike in coal prices it effected from January 1 in the face of stiff opposition from user firms, including power, steel and cement, to its new pricing formula.

CIL Chairman N C Jha said the company will delink the rates from international parity prices and eventually, this will reduce the prices for different grades of coal.

He added that the reduction in prices announced ton Tuesday will be with retrospective effect from January 1 and CIL will review the system after March.

However, he clarified that GCV-based grading of coal will continue and anomalies in the pricing structure will get addressed after Tuesday's decision.

Addressing a press conference today, Coal Minister Sriprakash Jaiswal said, "The GCV (Gross Calorific Value) mechanism will be revenue neutral and assessment (of  Tuesdays cut in prices) will be done after March."

CIL had shifted to a new pricing mechanism (based on GCV) from January 1. Under this system, prices are linked to the actual calorific value, or quality, of coal.

The new pricing mechanism resulted in an increase in rates of the fossil fuel, even though the Coal Ministry had indicated the new formula would be revenue-neutral.

Till December 31, 2011, CIL used to follow a pricing mechanism based on the Useful Heat Value (UHV) of coal, which deducted ash and moisture content from the standard formula.

Consumers across sectors including power, cement, aluminium and steel have opposed the new methodology as they feel that prices have risen substantially and this will necessitate an increase in the prices of their own commodities.

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