Contrary to Coal India's initial commitment, the gross calorific value (GCV)-based prices are expected to boost the Rs 50,000-crore consolidated balance-sheet of the coal major by an estimated 12.5 per cent, or a little over Rs 6,000 crore annually, according to sources. The company previously said that the switchover to the new system should be “revenue-neutral”.
Meanwhile, the Union Government has reportedly notified the new GCV-based cess and royalty formula to be applicable to States. While details of the same are not available, consumer groups indicate that this may further impact the landed cost of coal to all consumers.
Consumers hit
While the price-rationalisation may have minimal impact on the regulated sectors, largely power, non-regulated sectors such as cement, iron and steel, aluminium, paper and many others should feel the pinch.
Official confirmation on the same is not available. Though officially notified, the new prices — scheduled to come into effect from midnight on Saturday — have yet to be released at the CIL Web site. Major consumer associations were, however, given access to new price formula on Saturday evening.
Initial estimates suggest that prices of C and D grade coal will experience a sharper rise under the new formula, expectedly boosting revenues of Central and Northern Coalfields.
On a rupee per calorie basis, Eastern Coalfields — which suffers from one of the lowest man-to-coal ratios — is offered a 6 per cent mark-up over other miners to ensure its revenues are not impacted.
The prices of low-ash A and B grade coal which were already linked to international prices will be least affected. The E and F grades, mostly consumed by power stations, will experience some upward movement.
Dual pricing
According to sources, the new pricing formula continued with the practice of dual pricing for regulated and non regulated sectors so as to ensure that the power sector is least affected. While CIL sources expect that the dual pricing, coupled with minimum movement in the E and F sectors, to have minimum impact on cost of coal for power sector, there are concerns that the old-generation power stations linked to good quality coal may witness a rise in fuel cost.