Coal India raises prices 30% for key sectors

Coal India Ltd. | Mining & Minerals | Metals & Mining | BSE: 533278 | NSE: COALINDIA

28 Feb 2011 Evaluate

Amidst expectation of the appointment of coal price regulator, Coal India affected a 30 per cent increase in prices for non-regulated sectors such as cement, iron and steel, aluminum, paper, among many others. The decision will impact captive generation.

Though the regulated sectors, including power and fertiliser, are largely spared from the price hike, a parallel decision to bring parity in the prices of the E & F grades of coal produced by different subsidiaries has made the offerings of Mahanadi Coalfields (MCL) costlier for the power sector by a flat Rs 90 a tonne or 20 per cent. The impact is more on the buyers of MCL coal from non-regulated sectors who will now have to fork out 30 per cent over and above the Rs 90/tone increase. Price of coal for these sectors will move up 54 per cent. National Aluminum Company will be severely hit in this segment.

The decision of Coal India to increase prices, will inflate the company's revenues by approximately Rs 6,000 crore by way of increasing the average return by 12 per cent from the existing Rs 1,134 a tone. However, the net impact on the bottom line may be restricted to approximately Rs 1,000 crore a year; due to increased labour and social welfare costs.