CIL may hike prices for power units in pre-commissioning stage

In a desperate move to shore up revenues, Coal India Ltd (CIL) is planning a steep 30-40% hike in prices of coal to be supplied to power plants for trial run and commissioning. The decision has already been communicated to the ministry for its permission.

The decision, if accepted by the ministry, would immediately impact plants of companies like CESC Ltd, GVK Power, Prism Cement, Jaiprakash Associates, NTPC, and state-government owned entities like DVC and Madhya Pradesh State Mining Corp, which are expected to get commissioned in the current financial year.

The coal supplied and used for trial run of a power plant before it starts commercial production is technically called "coal carpeting" and is not covered under the fuel supply agreement (FSA) which happens at the notified prices.

"As per existing arrangements, coal supplies for carpeting and trial run is provided to an FSA holder on the basis of recommendations of the Central Electricity Authority," an official of CIL explained.

Piyush Goyal, who is both the power as well as coal minister is against the proposal for steep hike in coal supplies during the pre-commissioning stage.

"Request of Ministry of Power to reconsider the charging of 30-40% higher prices for carpeting may be considered by CIL on receipt of proposal from the power ministry," a ministry document considered during Monday's meeting said.

The development comes at a time when CIL is otherwise seeking ways to hike prices of some varieties of coal by about 10% to pad up its revenue in the face of falling income from e-auction.

The company has recently agreed to keep its e-auction sales to 7% of its total sales from a level of 12% in FY14 after a directive from the ministry.

Goyal recently asked it to cut its e-auction sales by half or to 25 million tonne this year to make more coal available for the fuel-starved power sector.

Apart from lower revenue from e-auction, CIL is also facing cost-push factors like a decision to pay Rs 40,000 festive season bonus to employees. With an employee base of 3.7 lakh, the pay-out will lead to an outgo of about Rs 1,300 crore.

Besides this, CIL is currently in negotiation with NTPC to settle dispute over poor quality of supplies which may lead to an outgo of about Rs 725 crore.

Meanwhile, the ministry said on Tuesday that it has extended the term of additional coal secretary A K Dubey as CIL's chairman cum managing director for another period of three months till December-end, indicating that the government is yet to find a candidate for the full-time post of CMD following the sudden exit of Narsing Rao in May.