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Thursday, January 19, 2012

Coal India says GCV prices at a discount, not premium

Thursday, Jan 19, 2012

Want to know how Coal India’s new pricing methodology — based on the gross calorific value (GCV) of coal as against the useful heat value taken into account earlier — has impacted India Inc? Here’s a definitive response from Coal India.

The state-owned company has told Kolkata High Court that following the implementation of the new pricing norm, its coal is selling at a discount ranging from 25% for higher grades to 63% for lower grades compared with the international prices.

“An additional discount in the range of 14-38% in coal of less than 5800 Kcal/kg GCV has also been offered for power and other regulated sectors,” Snehatosh Majumder, general manager (legal) and constituted attorney of Coal India has said in an affidavit recently filed in the court, a copy of which is available with DNA.

The submission has been made to oppose an affidavit filed by Subhas Datta, a green crusader, who has filed a public interest litigation against the coal major’s recent price increases and shift to a new pricing norm.

Coal India says GCV prices are at a discount, not premium
Coal India has also told the court that it is difficult to find out the exact impact of the new pricing norm on its revenues, which can be reasonably ascertained only in the next 2-3 months. Also, Coal India’s board would be reviewing the whole system after that. “The prices of coal as per earlier pricing mechanism cannot be directly compared to the price as per the new GCV regime. It will take some time to ascertain the actual impact on revenue of such switching over.

Keeping this in mind, the CIL Board while according approval to this new pricing regime has kept a provision to review the same after three months... the correct picture for the change in price would emerge in coming two to three months, only after the new GCV based grading system is stabilised across the coal companies,” Coal India has told the court. Arguing against the petitioner’s contention that the introduction of the GCV-based pricing would lead to an increase in prices, Coal India has argued that the claim hasn’t been substantiated.

“With reference to the allegations contained in para 3, I state that petitioners themselves have admitted that they could not compare between the erstwhile and the revised price under GCV system. Therefore, comments made hereunder to the effect that the price increase may be more than 100% through recent notification is unsubstantiated,” Majumder has said in the affidavit.
Coal India’s woes multiplied on Wednesday with the court fixing the next hearing on February 15 maintaining that its January 6 order will continue. The high court had on January 6 requested Coal India not to give effect to its December 30 notification for shifting to the GCV system.

“The good news is we are now at a liberty to raise bills against our supplies to the power companies. The bad news is we can only bill under the system prevailing before the introduction of the GCV pricing. Things are in a complete mess and we urgently need to resolve this,” a Coal India official said after conclusion of Wednesday’s hearing.
sourced: DNA

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