Coal India Ltd has increased prices of the commodity for long-term buyers as the world’s largest miner seeks to offset higher staff salaries.

The Kolkata-based company will raise base prices of the top nine grades of thermal coal by 8 per cent starting May 31, according to a stock exchange filing Tuesday. The hike will boost revenue for the ongoing fiscal year through March by Rs 2,700 crore ($326 million), the company estimated, without giving further details. The new prices will be for all categories of customers. 

The price increase, the first in more than five years, is unlikely to impact demand for the dirtiest fossil fuel, which has surged on higher electricity demand as industries bounced back from the pandemic and sweltering heat forces people to crank up cooling appliances. Despite the higher rate, domestic coal prices remain cheaper than imports, spurring the miner to invest in capacity expansion.  

“The price revision is well below our expectations,” said Rahul Kailash Jain, an analyst at Mumbai-based Systematix Shares & Stocks India. “It doesn’t even cover the rise in salaries.”

The top grades are mostly used by non-power industries. State-run Coal India hasn’t touched the lower grades, mostly consumed by power plants, to avoid an inflationary impact during the election season, Jain said.    

The company divides its coal in 16 categories on the basis of gross calorific value. The top nine grades that will fetch higher prices cover coal from 4,300 kilocalories a kilogram to 7,000 kilocalories. 

The company’s management has been seeking a price increase for months, as it incurred higher diesel costs to run machinery at its mines, while negotiating with the unions for an increase in staff salaries. The company finalised a 19 per cent salary hike for its non-executive staff for a period of five years starting retroactively from July 2021. Provisions to cover the increase caused an unexpected drop in its profits for the quarter ended March

Coal accounts for about 70 per cent of electricity generation in the country, which is the third-biggest emitter of greenhouse gases.