The Board of Directors of Coal India Ltd (CIL) on Friday approved a proposal to adopt the internationally accepted, gross calorific value (GCV)-based pricing mechanism beginning 2012. The new pricing notification will be released on Saturday.
Though the CIL Chairman, Mr N.C. Jha, maintained that the new mechanism, as advocated by the Union Coal Ministry, will have “minimum price impact” on the consumer bringing in a “slight” positive impact on company's revenue, sources told Business Line that the in-built price rationalisation, coupled with levies and taxes, may push up the landed cost of coal for consumers, including the power sector.
The new mechanism will replace the existing seven grades, each divided by a broad bandwidth of 600-1,100 kilo calorie (kcal) useful heat value (UHV), by large number of products of 300 kcal bandwidth each beginning 2,200 kcal to over 7,000 kcal. The new system has done away with the anomalies in pricing of same grade coal produced by different collieries as well as subsidiaries.
Price Rationalisation
“There is some (price) impact as we have brought in uniformity in pricing (meaning coal of a particular GCV will be sold at the same price by mining subsidiaries). The rationalisation was done keeping in mind that the subsidiaries do not face adverse impact on revenue,” Mr Jha told
Cess and royalty
Meanwhile, the Union Coal Ministry is reportedly gearing up to notify the new mechanism for calculation of cess and royalty payable by miners to the State governments. The mechanism will be devised in a manner that the State revenues do not go down. Notification to the Coal Controller is also due.
Quality concerns
Meanwhile, the switchover to the new system may give rise to quality concerns on the part of consumers as CIL is yet to procure adequate calorie-meters. “In the next three months, all our 81 areas will be equipped with calorie metres,” Mr Jha said. Currently, the company will convert the UHV into GCV using available conversion calculators.