Coal India likely to increase prices

KOLKATA: Coal India, the world's largest coal miner, is likely to increase prices once again during July-August after it has negotiated a salary hike. The Kolkata-based company raised prices last month by an average 12%, which is expected to boost its profit after tax to Rs 11,000 crore during 2010-11.

"The average 12% hike in coal prices last February would fetch CIL additional revenues of 6,000 crore a year. This is just enough to cover inflation and salary hike in 2010. After another round of wage negotiations, we will need to raise prices again," said CIL chairman N C Jha. The next round of price hike is likely to cover all sectors including power, which had been left out last month. The coal behemoth has decided to raise prices every 18 to 20 months after the next round. Besides salary hike and inflation, it will take care of the effect of a bill that proposes sharing 25% of profits with the project-affected population.

According to officials, CIL is expecting a profit after tax of Rs 11,000 crore during 2010-11, against Rs 9,622 crore in the previous year. "This year, the effect of the recent price hike could be reaped only for one month. During 2011-12, the company is expecting a 20% rise in profit after tax," a senior CIL official said.

In February, prices of premium grades of coal - A and B - were linked to international prices, and will now be offered at a 15% discount on the global spot prices. The benchmark price will be decided through a complex formula involving calorific value of coal as well as on the basis of Indonesian coal spot prices. The other grades - C to F - will be 30% dearer than the earlier notified prices.

The power, fertiliser and defence sectors were left out of the hike to reduce its effect of inflation. These three sectors consume around 80% of CIL's coal.