New coal pricing formula to push up electricity cost by 60 paise a unit

The new coal pricing formula adopted by Coal India Ltd (CIL), the country's sole coal supplier, could push up unit cost of electricity by as much as 60 paise to levels of 3.60-4.60 a unit, against the average current tariff realisation of National Thermal Power Corporation (NTPC) of Rs3-4 a unit.

Power tariff at NTPC had gone up to Rs3.3 per unit in September 2011, up from 2.66 for most of last year. This has since gone up to Rs3-4 a unit.

Coal India switched from the useful heat value (UHV) based coal grading system to gross calorific value (GCV) system for pricing coal, effective 1 January, in a move that pushed up costs for power producers.

Power companies have been raising the issue with Coal India. However, CIL claims that the shift from the UHV to GCV-based system will be revenue neutral for coal consumers.

Power generating companies usually use grade E and F coal. The basic price of grade E coal under the calorific value based grading system would be Rs880-1,781 a tonne against Rs730-1,090 under the old grading system, data with Coal India showed. For grade F coal, the price will be Rs630-933 against Rs570- 870 earlier.

The union power ministry had also taken up the issue with the coal ministry stating that the switchover would have serious technical and financial implications on tariff.

The GCV-based coal pricing system is an international practice but it also requires that suppliers meet some basic parameters before implementing it, according to the power ministry.

Coal suppliers in the international market sell coal under legally-enforceable supply agreements and follow stringent quality norms, it was pointed.