By Sudheer Pal Singh
New Delhi : Coal India’s price revision, that would help it partially offset the impact of the wage revision due in July, is an attempt to align domestic coal to import parity prices.
CIL yesterday announced an increase in prices for cement and steel sectors, but spared power, fertiliser and defence. The monopoly coal producer has adopted differential pricing this time. “After the hike, only the price of A and B grade coal, which has high calorific value as compared to other grades, would see any significant increase,” said a senior CIL executive.
Coal of A and B grades has gone up by 150 per cent, and the rise for the other varieties is about 30 per cent. The Integrated Energy Policy of 2006 had recommended import parity pricing for coal. After the increase, coal would be priced at a discount of about 15 per cent to the imported parity prices.
CIL produces 430 million tonnes annually, 77 per cent going to the power sector. Domestic fertiliser consumes the bulk of the rest.
“We sell between 10 and 12 per cent of our production through e-auction. A miniscule part of the production goes to the cement and sponge iron sectors. The current increase (for grades other than A and B) is at par with the floor price at e-auction, which is typically 30 per cent over the notified price,” the Coal India executive said.
As a result of the current rise, cement prices are likely to go up by Rs 5 per bag. This, in addition to the impact of the Budget announcement of a rise in excise duty for cement companies, is likely to lead to an overall increase of up to Rs 10 per bag.
“The increase by Coal India Ltd will result in (cement) industry profitability declining by around 500 basis points, to 18 per cent in 2011-12,” rating agency Crisil said in its latest report. This is despite the expected three-four per cent increase in cement prices in 2011-12 on the back of expected recovery of the operating environment, it added.
Steel companies which use sponge iron as raw material are also likely to be impacted. “The 30 per cent increase in non-coking coal prices will adversely affect profitability of sponge iron players,” the Crisil report said.
Meanwhile, CIL is hopeful the price rise would translate into additional revenue of Rs 650 crore in the current financial year and Rs 6,200 crore during the next one, ending March 2012. The company’s previous increase in prices, by 11 per cent in October 2009, had resulted in an average increase of Rs 77 per tonne in the pit-head price of coal delivered to power utilities.
International spot prices of coking coal have recently gone up by $40-50 per tonne to $290 per tonne, as production suffered due to floods in Australia’s Queensland province, that alone supplies around 40 per cent of the world’s coking coal exports. (Business Standard)
CIL yesterday announced an increase in prices for cement and steel sectors, but spared power, fertiliser and defence. The monopoly coal producer has adopted differential pricing this time. “After the hike, only the price of A and B grade coal, which has high calorific value as compared to other grades, would see any significant increase,” said a senior CIL executive.
Coal of A and B grades has gone up by 150 per cent, and the rise for the other varieties is about 30 per cent. The Integrated Energy Policy of 2006 had recommended import parity pricing for coal. After the increase, coal would be priced at a discount of about 15 per cent to the imported parity prices.
CIL produces 430 million tonnes annually, 77 per cent going to the power sector. Domestic fertiliser consumes the bulk of the rest.
“We sell between 10 and 12 per cent of our production through e-auction. A miniscule part of the production goes to the cement and sponge iron sectors. The current increase (for grades other than A and B) is at par with the floor price at e-auction, which is typically 30 per cent over the notified price,” the Coal India executive said.
As a result of the current rise, cement prices are likely to go up by Rs 5 per bag. This, in addition to the impact of the Budget announcement of a rise in excise duty for cement companies, is likely to lead to an overall increase of up to Rs 10 per bag.
“The increase by Coal India Ltd will result in (cement) industry profitability declining by around 500 basis points, to 18 per cent in 2011-12,” rating agency Crisil said in its latest report. This is despite the expected three-four per cent increase in cement prices in 2011-12 on the back of expected recovery of the operating environment, it added.
Steel companies which use sponge iron as raw material are also likely to be impacted. “The 30 per cent increase in non-coking coal prices will adversely affect profitability of sponge iron players,” the Crisil report said.
Meanwhile, CIL is hopeful the price rise would translate into additional revenue of Rs 650 crore in the current financial year and Rs 6,200 crore during the next one, ending March 2012. The company’s previous increase in prices, by 11 per cent in October 2009, had resulted in an average increase of Rs 77 per tonne in the pit-head price of coal delivered to power utilities.
International spot prices of coking coal have recently gone up by $40-50 per tonne to $290 per tonne, as production suffered due to floods in Australia’s Queensland province, that alone supplies around 40 per cent of the world’s coking coal exports. (Business Standard)
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