Coal may cost more as ministry changes pricing formula

The ministry of coal is migrating to gross calorific value (GCV) based grading system for non-coking coal from the existing useful heat value (UHV) based system with effect from 1 January 2012.

The calorific value-based grading of coal, which is an international practice, is being introduced following recommendations of the Integrated Energy Policy Committee and the expert committee on roadmap for coal sector reforms, an official release said on Friday.

While the coal ministry claims that the new system will not lead to any significant change in the pricing, Coal India chairman N C Jha says the new pricing formula will have ''minimum price impact'' on consumers.

The coal ministry, however, maintains that the new system of grading will create a win-win situation for both the coal consumer and producer by incentivising improvement in quality.

Consumers will be assured of quality while producers can hope to realise the right prices, according to the ministry.

The board of directors of Coal India Ltd (CIL) also approved the proposal to adopt the gross calorific value (GCV)-based pricing mechanism beginning 2012. The new pricing notification is being released today.