Coal India defers new pricing methodology

9th April 2018

Coal India Ltd (CIL) has put in abeyance implementation of its new coal pricing methodology “till further advice” after customers pointed out that the new regime should be introduced only after the state-owned coal behemoth has the requisite supporting infrastructure.

The company’s board, on January 8, had approved the new system, where coal was supposed to be billed on the basis of gross calorific value (GCV) from April 1.

Currently, the fuel is charged on a per-tonne basis, depending on their grades.

In line with the standard global practice, the proposed system would see customers paying for the amount of energy they can get from the coal received (calories/kg).

CIL met coal consumers to discuss the issue on March 26, in which the latter pointed out several problems such as slow processing speed of GCV measurement and uncertain tax implications.

Sources told FE that some companies also questioned the absence of white paper before launching such a different pricing system.

More than 70% of coal produced by CIL is consumed by the power sector. Power companies are also worried about the regulatory implications of the proposed step, as regulators take a long time to pass through the additional fuel costs into power tariffs.

As recently reported by FE, in a letter written to RBI governor Urjit Patel, the association of power producers had pointed out that apart from the Rs. 8,300 crore pending receivables from discoms, about Rs. 7,800 crore is stuck due to various delays in receiving orders from regulators.

In a letter sent to consumers on April 1, CIL admitted that “coal companies are yet to achieve the robustness of system and are not fully equipped with proper infrastructure to implement the system”.

It is also not clear if, like global practise, CIL would offer discounts to customers if the coal quality does not match the promised standards, an expert said on conditions of anonymity.

Source: FINANCIAL EXPRESS