Coal India works out pricing policy based on energy content

Coal India has decided to replace its pricing policy from rupees per tonne to paise per unit of energy for different grades of coal sold from April 1, 2018.

The grading system, based on total energy content per kilogram, remains but the price of each consignment will be determined by a rate fixed for each unit of energy for that particular grade and the total energy contained in 1kg of coal for the consignment.

This means that the price of each tonne of coal will be based on its total energy content. Under the present system, the price used to be same for a range of energy content which was categorised as grades.

Coal India, however, has reduced the number of grades from 17 earlier to 10 under the new system. The broad category of grades has been divided into three — high energy content, medium energy content and low energy content.

In the medium range where energy content will vary from 4901 kilo calorie per kg (read total energy content in one kilogram) to 5800 kilo calorie, for example, coal will be sold on rates that will vary from 29 paise per kilo calorie to 41 paise per kilo calories. Thus, one tonne of coal with a total energy content of 4301 kilo calorie will cost 4901 x 29 paise per tonne of coal. This will require each consignment to be tested for the exact quantum of energy content in each kilogram of coal and Coal India has decided to put in place systems and infrastructure by April 1, 2018.

According CIL Chairman Gopal Singh, the new system is based on the global system of coal pricing.

“It provides consumers with a more accurate and transparent method for arriving at coal prices. Additionally, calculating the basic price of non-coking coal of any mine of CIL based on its energy content would be simpler. In some cases, prices have been reduced even to the extent of Rs 162/tonne,” a senior Coal India executive said.

Due to the earlier band pricing system, consumers had to pay a fixed price for different energy content as long as was within one band. Now they will pay different prices for different energy content in each band.

It is expected to incentivse mine managers to maintain quality.

Managers will focus on quality since marginal improvement even by one unit of energy will fetch additional revenue to the individual mine and have an impact on the bottom-line of the unit.

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