Coal India roll backs hike in coal prices

 Coal India Ltd (CIL) today rolled back the hike in prices of coal under its new gross calorific value-based pricing mechanism that came into effect from January 1 in the wake of protests by consumers

CIL Chairman N C Jha said the company will delink the rates from international parity prices and eventually, this will reduce the prices for different grades of coal.
He added that the reduction in prices announced today will be with retrospective effect from January 1, 2012, and CIL will review the system after March.

However, he clarified that GCV-based grading of coal will continue, though anomalies in the pricing structure will get addressed after today's decision.

Addressing a press conference today, Coal Minister Sriprakash Jaiswal said, "The GCV (Gross Calorific Value) mechanism will be revenue neutral and assessment (of today's cut in prices) will be done after March."

The new pricing policy based on the gross calorific value (GCV) had led to a 5-12 per cent increase in prices of different grades of coal. Jha said delinking of local prices from global rates would assist in offsetting the projected 12.5 per cent rise in prices.
"The overall price increase that was coming (from the new pricing) was about 12.5 per cent... since there was a huge reaction, we have completely withdrawn that (new) pricing. We have replaced that pricing with the new one," Jha said.

CIL had shifted to a new pricing mechanism from January 1. Under this system, prices are linked to the actual calorific value or quality of coal.The new pricing mechanism (based on Gross Calorific Value (GCV) resulted in an increase in rates of the fossil fuel, though the Coal Ministry had indicated the new formula would be revenue-neutral.

Till December 31, 2011, CIL followed a pricing mechanism based on the Useful Heat Value (UHV) of coal, which deducted ash and moisture content from the standard formula.

Consumers across sectors including power, cement, aluminium and steel have opposed the new method as they feel that prices have risen substantially and this will necessitate an increase in prices of their own respective commodities.