Diesel price hike may cost Coal India Rs600cr a year

Coal India Ltd, which has a virtual monopoly on production of the fuel, has said that the Rs5 per litre hike in diesel prices announced last week would put an additional burden of Rs600 crore per annum on the state-run company.

"For each Re1 hike in diesel price, the impact is Rs120 crore. So for a hike of Rs5, the annual impact would be Rs600 crore," CIL chairman and managing director S Narsing Rao said during the company's annual general meeting in Kolkata.

Asked if CIL – which supplies over 80 per cent of the country's consumption – would revise coal prices, Rao said, "We will see." Obviously, the company cannot raise prices without a nod from the central government.

For each tonne of coal production, the diesel cost is Rs55, Rao said.

According to CIL officials, the average cost of production per tonne is Rs560-570; and based on this the impact of the diesel price hike is close to 10 per cent.

During the AGM, Rao said he expects that some of the de-allocated coal blocks following the 'coal scam' will come to Coal India. The coal ministry will decide on this, he said.

Speaking about the fuel supply agreement that CIL was obliged to sign with electricity producers and price- pooling, Rao assured shareholders that under no circumstances would the financial and legal interests of the company be jeopardised by signing the agreement.