Price hike will not affect Coal India's MoU customers

Pratim Ranjan Bose Kolkata | Updated on March 12, 2018

The decision on the pricing mechanism for the future MoUs is expected to be taken during the March 28 board meet of ECL

The consumers of Coal India Ltd (CIL) procuring A and B grade Ranigunj variety of thermal coal at negotiated price — MoUs as they call it in CIL — may be least affected in this season of coal price hike. Ranigunj coal is produced by Eastern Coalfields Ltd, a wholly owned subsidiary of CIL.

The India coal major sells anything between 5.5 to 7 million tonne of such high quality coal (of heat value exceeding 5600 kcal a kg) through annual contracts at import-linked prices to meet the requirements over and above the quantities agreed in the fuel supply agreements (FSA).

Major buyers

The major buyers through this route are: power utilities like NTPC, CESC, Durgapur Projects Ltd (DPL), DVC and West Bengal Power Development Corporation Ltd. Steel Major SAIL also procures 2 lakh tonne of such coal annually.

Talking to Business Line, CIL Chairman, Mr N. C. Jha, said that while the corporate policy suggests that the company was eligible to sell coal through this route at a market determined price, CIL does not subscribe to undue profiteering. “I am not fully aware of the issues involved, but I do not foresee a major increase in prices for MoU customers,” he said.

Mr Jha was responding to queries regarding customers' apprehension that ECL may charge nearly 40 per cent premium over and above the recently notified price of such coal at Rs 4,100 a tonne for supplies through MoU route. Apprehensions were rife as the existing MoUs stand to be terminated on March 31.

The decision on the pricing mechanism for the future MoUs is expected to be taken during the March 28 board meet of ECL.

When contacted an ECL official also allayed such fears. “There are proposals to charge a premium (to MoU customers). While the board will take a final call on the issue, market conditions will hold the key to pricing decisions,” he said.

According to him, considering the present landed cost of south African coal in Indian ports at $ 105 ( Rs 4,700, at Rs 45 a dollar) a tonne for the 5300 Kcal coal on gross as received (GAR) basis, there is not much headroom either for increasing prices of MoU coal.

Published on March 09, 2011

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