Date | Dec 25, 2016:
Eastern Coalfields Ltd may suffer a loss of Rs 500 crore in the current fiscal after it cut prices to compete against cheaper high-grade coal from Australia, South Africa and Indonesia. The Coal India subsidiary had come out of the BIFR (Board for Industrial and Financial Reconstruction) less than two years ago.
The coal supplied by ECL is priced higher than the other subsidiaries of the public sector miner as it lifts the best-grade coal from the eastern part of the country. However, from May 30 this year, Coal India lowered the price of high-grade coal (G1 to G5) and increased the rates of the low-grade variety (G6-G17).
The readjustment will result in an effective price hike of 6.2 per cent for Coal India, bringing in an additional revenue of 4 per cent. But the move has put ECL in a fix, which has a target to produce 46.94 million tonnes in 2016-17.
An ECL official said the company reduced the price of high-grade coal, namely the G2-G5 grades, with a gross calorific value of 6,700-6,100 kilo calories per kg. "In our mines, we produce G2 to G5 category high-grade coal. The price was earlier between Rs 5,200 and Rs 3,200 per tonne, which we had to reduce by up to Rs 500 on an average as part of CIL's decision to compete with foreign companies," said the official.
The current price of ECL's high-grade G2 coal for the power sector is Rs 4,497.56 per tonne, while that of G6 coal is Rs 2,661.12. ECL has increased the price of its lower grade coal, namely the G7 to G17 category, by Rs 100, but their demand is less.
According to CIL, the objective of the price rationalisation is three-fold. First, it will increase the overall revenue by Rs 3,900 crore, the proceeds of which can be used for the forthcoming wage revision and rising operational expenditure.
Second, it will make Coal India's high-grade coal competitive compared with imports, the dependence on which is coming down following a central directive.
Traditionally, old power plants were designed to handle high-grade coal with low impurity content. But the Union power ministry wants to replace these plants with ones that can run even on low-grade coal. NTPC is planning to replace its 11,000MW generation capacity, and engineering firm Bhel is in the race to supply the technology.
Simultaneously, there is a glut in the market because of tepid demand from the power sector. Around 57 million tonnes of pithead stock are lying idle with Coal India.
Although CIL officials termed the price revision as an effort to "become more consumer-friendly", industry observers said the price cut was aimed at improving offtake and clearing stock.
ECL came out of the BIFR in February last year after registering profit in two consecutive fiscals (2013-2014 and 2014-2015). The coal major also earned a net profit of Rs 874 crore in the last fiscal.
"We have managed to increase demand and sell coal from our mines to the power sector across the country but at the same time we are realising lesser amount because of the slash in the price. However, we had no option as the countries such as Australia, New Zealand and Indonesia were selling coal at a cheaper price. The power sector, which is our prime customer, was importing coal from there and we were facing stiff competition," said an ECL official.
ECL general manager (technical) Niladri Roy said the company now supplied at least 30 rakes of coal to different power plants across the country, an increase of more than 40 per cent since May this year when ECL reduced the price.
However, the trade unions alleged that it was a move to divest the coal monolith by turning ECL into a loss-making company.
"The Modi government is trying to sell all public sector units to private companies of his choice. The move to reduce the price of coal is an attempt to make ECL a loss-making company. They are trying to privatise it," said Hareram Singh, general secretary of the Trinamul Congress trade union for ECL mines.
Citu leader Bansagopal Chowdhury said they would launch a movement against the attempt to again make ECL a sick company.
(Source: https://www.telegraphindia.com/)