Coal India's power problem

The miner needs to raise prices but it is caught between political constraints on its major buyer, electricity producers and close decision-making control by the coal and power ministries

- SUBHOMOY BHATTACHARJEE

Last month, Coal India (CIL) Chairman Pramod Agrawal made a case for raising the price of domestic coal, unchanged since 2018. Though he has good reason to argue for the rise, he will probably not be involved when the final decision is made, either way. He will not be the first one.

To test the waters, CIL's sister concern, Singareni Collieries Company Limited (SCCL), raised by 100 per tonne the price of all types of coal it sells, with effect from April 1. But this is minor. Compared to Indonesian Kalimantan coal ruling at $178 per tonne, CIL and SCCL prices are far lower at $40 per tonne.

This modest price rise must be juxtaposed against CIL's record FY23 production to offer a sense of the paradox in India's coal economy. Since the price of electricity, which accounts for 74 per cent of CIL's production, is mostly fixed on political considerations, CIL has to sell coal at rack rates.

But the miner's impressive performance in FY23 has led to demands for improving on it, but without providing it the cash support needed to make the necessary investment. That support, then, can only come from a higher price for the coal it mines.

But that is a difficult question since for all practical purposes, CIL's role and by extension that of the coal ministry has been relegated to only that of mining. The allocation principles including ordering of railway rakes, at least to the power sector, is now handled by the power ministry. As an example, at the end of March, this ministry held a meeting "regarding fair distribution of available domestic coal". It decided on the state-wise requirement of rail rakes for transport of coal and advised the coal ministry to "allocate rakes for coal supply from CIL and SCCL" accordingly.