The January 31 correction in coal prices has brought the ailing Eastern Coalfields Ltd (ECL), a wholly owned subsidiary of Coal India Ltd, to the brink of financial losses. On the brighter side, however, it has improved the prospects of a reduction in electricity tariff by power producers, especially those based in West Bengal who use ECL thermal coal.

A close scrutiny of prices of ECL coal — both the pre-existing useful heat value (UHV) based product list till December 31 and the latest gross calorific value (GCV) based price-list (effected from January 1) — indicates that, excluding the erstwhile A and B grades, ECL stands to fetch lower prices for the rest of the product range.

This indicates that the company's revenues from large opencast mines at Rajmahal, Shonpur Bazari and others — so far considered to be money-spinners —will now be earning less revenue, creating further pressure on finances (since it is) over burdened with a large number of loss-making underground mines. Interestingly, a lower price for ECL coal would lead to lower royalty earnings for the West Bengal Government. The calculations may be reserved only if the revenues from erstwhile A and B grade increases proportionately, as those prices have actually gone up. A grade slippage, during the actual despatch, however, will only add to the woes.

Incidentally in the new price regime, between 3 grades (each separated by 300 kcal a kg bandwidth) between GCV 5500-6400, prices vary from Rs 1,450 a tonne to Rs 3,970 a tonne, indicating distinct possibilities of major revenue loss in case of grade slippage.

> pratim@thehindu.co.in

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