Power producers still evaluating Coal India’s new pricing policy

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Power producers are still evaluating Coal India’s claim that its new pricing policy will bring down fuel costs for generating electricity. The state-owned coal monopoly has announced introduction of a calorific value-based pricing policy for power sector consumers from April, and issued an indicative chart for these customers.

While one major power company said the new policy would make coal cheaper for them, Ashok Khurana, director general of the Association of Power Producers, said the industry is still studying the situation.

“Coal India should have discussed with stakeholders before announcing a new pricing policy,” he said.

A senior Coal India executive said: “The proposed system would be value for money for power consumers since the billing accounts for each unit of energy content in the coal that is delivered. It will help power generators reduce costs.”

The new policy maintains the price differential of 20% between core-sector buyers – power, fertilizer and defence – and others.

Coal India chairman Gopal Singh said the indicative rates announced for the power sector will be the base rates applicable for power consumers with fuel supply agreements while non-core consumers will pay 20% more.

“We have been charging non-core consumers 20% more than power consumers in the recent past,” Singh said. “This will continue to be the case even under the new pricing policy. Premium grades would cost the same for both core and noncore grade.”

He said that prices of seven grades are being reduced under the new policy.

All consumers will pay the same rate for coal with total energy content upwards of 5,800 kilo calorie per kilogram of coal.

Company executives said all consumers would be paying 48 paise per kilo calorie if they buy coal with energy content above 6,100 kilo calorie per kilogram. They would pay 46 paise per kilo calorie for buying coal with energy content varying between 5,800 kilo calories per kilogram to 6,100 kilo calorie per kilogram.

For coal with energy content below 5,800 kilo calorie till 5,500 kilo calorie the present difference between prices is around 8.9% for core and non-core consumers. If Coal India maintains the same differential then non-core consumers may have to pay 44.6 paise per kilo calorie while core consumers would pay 41paise per kilo calorie.

Rest of the grades would be charged at 20% more as is the case now.

Thus, going by the new pricing policy, a non-core consumer will have to pay 27.6 paise per kilo calorie for coal with total energy content varying between 3,101 kilo calorie per kg and 4,600 kilo calorie per kg. The corresponding rate for power consumers is 23 paise per kilo calorie.

Source: COALSPOT