CIL's pricing formula may increase generation cost by 40%: NTPC

NEW DELHI: State-run power major NTPC today joined the chorus of voices opposed to CIL's new coal pricing mechanism, asserting that it could lead to an increase in its generation costs by about 40 per cent.

The power generation cost of NTPC could go up by about 40 per cent on account of the new pricing system, NTPC CMD Arup Roy Chaudhary told reporters on the sidelines of the India Energy Conclave here.

Power producers are opposed to the new pricing mechanism adopted by CIL and implemented from January 1, which is based on the gross calorific value ( GCV) of coal, saying this has increased prices of certain grades by up to 179 per cent.

Till December 31, 2011, Coal India followed a pricing mechanism based on the Useful Heat Value (UHV) of coal, which deducted ash and moisture content from the standard formula.

However, unlike the UHV pricing methodology, in which coal was categorised into seven grades, the GCV-based system has 17 grades and the new prices have been fixed accordingly.

Meanwhile, CIL's board is likely to review the prices in a bid to rationalise them after the Coal Ministry took a decision to correct the prices in a meeting last week.

Earlier, Coal Minister Sriprakash Jaiswal had said, "Price fixed by them (CIL), in my opinion, is more than required."

The new GCV mechanism has been opposed by consumers across sectors, including power, cement, aluminium and steel, as they feel that prices have risen substantially and it will lead to an overall increase in the price of their respective commodities.