By Indronil Roychowdhury
A 150% hike in prices of A and B grade coal has put Coal India Ltd (CIL) subsidiary Eastern Coalfields Ltd (ECL) in a fix. With the hike, the notified price will touch the premium price point it realised for supplies under a memorandum of agreement (MOA) and it can hamper consumers’ interest.
ECL has MOAs with NTPC, Damodar Valley Corporation (DVC), West Bengal Power Development Corporation (WBPDCL), CESC, Durgapur Projects (DPL) and SAIL to supply 7 million tonne of A and B grade thermal coal of 5,500 kilo calories, equal to the calorific value of imported coal.
The companies under the MOA, pay a premium price of R4,950 per tonne for A grade coal and R4,800 per tonne for B grade coal against notified prices of R1,600 (A grade) and 1,520 (B grade) per tonne for an assured supply.
But after a 150% hike, the notified prices for A and B grade coal has gone up to R4,000 and R3,990 per tonne respectively, which at the consumers end touches R4,947 and R4,799 per tonne respectively.
The hike will bring the prices close to the premium level. So ECL, according to sources close to the development, is considering to pin the MOA prices somewhere at R7,000 per tonne.
ECL is also thinking of scrapping all MOAs and supply coal at a notified price. This means there would be no assured quantity for any consumer and A and B grade coal, mostly used for blending, will get into the common pool of supplies.
According to the present MOA, scheduled to be revised on March 31, WBPDCL had asked for the highest quantity of 30 lakh tonne per annum followed by NTPC 20 lakh tpa, DVC 7.8 lakh tpa, CESC 7 lakh tpa, DPL 3 lakh tpa and SAIL 2 lakh tpa.
Except WBPDCL, all the companies have so far lifted almost the entire MOA quantity and WBPDCL’s off-take was 50-55% of the agreed amount, an ECL official said, adding that in cases of low lifting there is no penalty clause because there is huge demand.
Of CIL’s total production A and B grade coal production is only 7%.
According to the official, although R7,000 per tonne is an exorbitant price and consumers don’t want to pay up, ECL can still realise this price if it pushes it to the e-auction route without assuring any quantity to any consumer.
In fact, the floor price for e-auction is set at a 30% premium above the notified price, which means at the present notified rate floor price for A and B grade coal would be R5,200 and R5,190 per tonne respectively and a premium above that can fetch R7,000 or more for every tonne of coal.
So scrapping MOA would by no means be against the interest of ECL, but would hamper consumers’ interest, the official said. Krishna Gupta, managing director of WBPDCL, said even if Rs. 7,000 is a very high price, it is better than not having any assured supply. “In fact, in the MOA the quantity demanded is reserved and thereafter even if it is not lifted there is no penalty. If import prices are low, but there are problems of logistics and inventory, it may put stock position under pressure,” Gupta said. He said the impact of coal price increase would ultimately be passed on to the consumers.
CESC chairman Sanjiv Goenka said his company was aware that the price for MOA coal could go up to R7,000 per tonne, but it was waiting for an official communication and has not decided anything on it as yet. The ECL board would take a final decision on March 28, an ECL official said. ECL’s total production this fiscal is expected to cross 30 million tonne, marginally higher than its production in 2009-2010, he added.(sourced:Financial Express)
Tags : A and B grade thermal coal, Rs 4950 per tonne
ECL has MOAs with NTPC, Damodar Valley Corporation (DVC), West Bengal Power Development Corporation (WBPDCL), CESC, Durgapur Projects (DPL) and SAIL to supply 7 million tonne of A and B grade thermal coal of 5,500 kilo calories, equal to the calorific value of imported coal.
The companies under the MOA, pay a premium price of R4,950 per tonne for A grade coal and R4,800 per tonne for B grade coal against notified prices of R1,600 (A grade) and 1,520 (B grade) per tonne for an assured supply.
But after a 150% hike, the notified prices for A and B grade coal has gone up to R4,000 and R3,990 per tonne respectively, which at the consumers end touches R4,947 and R4,799 per tonne respectively.
The hike will bring the prices close to the premium level. So ECL, according to sources close to the development, is considering to pin the MOA prices somewhere at R7,000 per tonne.
ECL is also thinking of scrapping all MOAs and supply coal at a notified price. This means there would be no assured quantity for any consumer and A and B grade coal, mostly used for blending, will get into the common pool of supplies.
According to the present MOA, scheduled to be revised on March 31, WBPDCL had asked for the highest quantity of 30 lakh tonne per annum followed by NTPC 20 lakh tpa, DVC 7.8 lakh tpa, CESC 7 lakh tpa, DPL 3 lakh tpa and SAIL 2 lakh tpa.
Except WBPDCL, all the companies have so far lifted almost the entire MOA quantity and WBPDCL’s off-take was 50-55% of the agreed amount, an ECL official said, adding that in cases of low lifting there is no penalty clause because there is huge demand.
Of CIL’s total production A and B grade coal production is only 7%.
According to the official, although R7,000 per tonne is an exorbitant price and consumers don’t want to pay up, ECL can still realise this price if it pushes it to the e-auction route without assuring any quantity to any consumer.
In fact, the floor price for e-auction is set at a 30% premium above the notified price, which means at the present notified rate floor price for A and B grade coal would be R5,200 and R5,190 per tonne respectively and a premium above that can fetch R7,000 or more for every tonne of coal.
So scrapping MOA would by no means be against the interest of ECL, but would hamper consumers’ interest, the official said. Krishna Gupta, managing director of WBPDCL, said even if Rs. 7,000 is a very high price, it is better than not having any assured supply. “In fact, in the MOA the quantity demanded is reserved and thereafter even if it is not lifted there is no penalty. If import prices are low, but there are problems of logistics and inventory, it may put stock position under pressure,” Gupta said. He said the impact of coal price increase would ultimately be passed on to the consumers.
CESC chairman Sanjiv Goenka said his company was aware that the price for MOA coal could go up to R7,000 per tonne, but it was waiting for an official communication and has not decided anything on it as yet. The ECL board would take a final decision on March 28, an ECL official said. ECL’s total production this fiscal is expected to cross 30 million tonne, marginally higher than its production in 2009-2010, he added.(sourced:Financial Express)
Tags : A and B grade thermal coal, Rs 4950 per tonne
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