Planning Commission panel for 10% price hike by Coal India

The Planning Commission has advised Coal India Ltd to increase coal prices 10-12% across the board.

The move is seen helping the country’s largest coal producer offset potential revenue loss from stoppage of coal sales through the e-auction route, as demanded by the power ministry.

At a time when the power sector is severely constrained for coal, e-auctioning allows companies from all sectors to participate, the power ministry has argued.

A Planning Commission official also underscored the power priority. “The power sector faces a shortage of about 30 million tonne (mt )coal for this fiscal, and diverting coal being sold through e-auctioning to the power sector can help mitigate the problem,” he said, requesting anonymity.

Of the 343.5 mt coal proposed to be supplied by Coal India to the power utilities this fiscal, 306 mt is already committed for units commissioned till March 31, 2009 under the fuel supply agreement. Thus, additional availability of coal for newly commissioned units during 2009-12 would be 37.5 mt only.

Coal India, however, is opposed to the idea of stopping e-auctions. The company, which sells coal at around 50% below international prices, had hiked prices 15% in February this year. It sold nearly 40-45 mt thermal coal, or 10-12% of its total coal production, through e-auctions last fiscal at Rs1,800-2,200 a tonne, as against the notified price of Rs800-1,200.

The Planning Commission has also suggested that Coal India liquidate about 28 mt of coal from its pithead stock. The PSU has
a pithead stock of about 70 mt at present.

Further, the panel has suggested that Coal India review its production plans and immediately expand underground mining. So far, the company has done only about 5-7% of total production as underground mining.