Friday, May 13, 2022

Coal price hike most urgent for CIL, survival of certain subsidiaries at stake: Chairman

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  • Even as international prices of coal near US$200 (Rs 14,935.62) per tonne, the state-run coal miner has held steady on the coal prices
  • For raising coal prices under long-term fuel supply agreements, Coal India will require the backing of the government as coal prices impact the economy and inflation

New Delhi: A price hike has become most urgent for state-run Coal India Ltd (CIL) and without it, the survival of certain CIL subsidiaries is at stake, said Chairman and Managing Director (CMD) Pramod Agrawal as he sent out an SOS to the government. While expressing the inability to increase coal prices suddenly in violation of contracts, the CIL Chairman said that he has been trying to get all stakeholders onboard. Addressing investors at an earnings call for Q3 of FY22, Agrawal said that everyday is critical for Coal India.

“I am trying to bring everybody onboard. And for me, everyday is critical. I hope price hike should take place immediately. It has become very urgent for Coal India. And for certain subsidiaries it has become so important that without a price hike, it will be difficult for them to survive,” the Coal India Chairman said.

Price hike: CIL holds steady even international coal prices soar

Even as international prices of coal near US$200 (Rs 14,935.62) per tonne, the state-run coal miner has held steady on the coal prices, with its current average regulated price realisation being around Rs 1,394 per tonne. For raising coal prices under long-term fuel supply agreements, Coal India will require the backing of the government as coal prices impact the economy and inflation. The last price hike was announced by CIL in 2018. “Most of the G1 to G5 coal goes to the NRS sector and it is linked to linkage auctions. Just because the international price has increased, we cannot increase our coal prices suddenly, breaking the contract. But the small portion of this coal which we auction, there we are getting good premium,” Agrawal told analysts.

Industry sources who spoke to PSU Watch said that a minimum of 10-11 percent hike in coal prices is necessary to avoid bottomline erosion.

‘Without price hike, coal production may suffer’

While reeling under the burden of huge outstanding dues from the power sector, Coal India also faces cost pressures from an impending rise in salaries and the high cost of diesel used for operating heavy mining equipment. At the end of December 2021, the net receivables from the power sector stood at Rs 15,000 crore. Although the Coal India CMD expressed hope that the financial year will end with most of the dues getting cleared, he also warned that without a price hike, coal production may fall, putting India’s energy security at risk as most of the economy is powered by coal.

The Coal India Chairman added that the PSU expects to end the fiscal with more than 630 Million Tonne (MT) coal production and 670 MT of coal supply, which would be a significant growth over last year’s figures. 

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