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CIL Will Review New Coal Pricing in Three Months

  • Power firms have said new pricing will push up cost of electricity.State-run behemoth, Coal India (CIL) will review the newly implemented pricing mechanism after three months. This is likely to give respite to thermal power generating companies that may incur fuel costs leading to increase in power costs.“Board will look at the impact on revenue ‘company-wise’ and will take a view on prices after three months,” CIL chairman Nirmal Chandra Jha told Financial Chronicle on Wednesday.The state-run enterprise is already selling coal at discount to local customers when compared to the price of imported coal of similar calorific value. Recently, CIL adopted new mechanism for pricing of coal based on gross calorific value (GCV). This is nearly 30 to 60 per cent higher than earlier average prices.

  • In many power purchase agreements (PPAs) between state distribution companies and producers, the end-user electricity tariff is capped. This will impact revenues of power companies where increase in cost of generation is not pass-through to the customers. Power generating companies have said that new pricing formula will push up cost of electricity generation. NTPC, India's largest thermal power producer said there might be 25-30 per cent impact in electricity tariff because of higher coal prices.“Generally, NTPC uses lower grade of coal for generating power. But, at time, we also use A, B, E, D and C coal depending on the availability. The overall impact on power tariff may up to the mark of 25 to 30 per cent,” said a senior NTPC official.

  • Countering power producers view, Jha said, “We have to watch the realisation of sales revenue. The prices are at 26 to 77 per cent discount to the import parity price for the same heat value at present.”At present, CIL prices are lower than global prices because of low calorific value. The state-run company may see an upside of 8 to 10 per cent in its fourth quarter earnings because of new price mechanism, brokerage firm Religare said in a recent report.The report said that the impact on power producers would be ‘negligible.’ On the other hand, cement and steel companies may see some rise in cost, it added.

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