India may need to import less high-quality coal as the
government changes pricing to encourage Coal India, the world's biggest coal
miner, to produce more of the grades needed to keep powering Asia's third
largest economy.
A new policy that links pricing to quality could encourage
Coal India, which accounts for about 80 percent of national coal output, to
boost the production of superior grades, officials and analysts said.
International coal prices are up to 40 percent higher than
domestic rates.
Coal accounts for more than half of India's power generation
and will be required for about 85 percent of the 75,000 MW of new capacity that
is due to come online in 2017.
India's peak-hour power deficit is about 12 percent, a
shortage which many analysts say drags down economic growth.
Under the earlier pricing formula, coal prices were divided
into seven very broad categories, with the calorific value — the gauge for
quality — ranging from 600 kilocalorie per kg to 1,100 kilocalorie per kg.
That gave less incentive to produce better grades because
whatever the quality within that range, the earnings were the same.
That has now changed as the new formula has 17 categories.
Most of India's coal is from open cast mines, making it
difficult for miners to keep quality consistent.
“Definitely under GCV, there is an incentive to improve
quality and sell at higher prices,” said a senior Coal India said who
declined to be identified as he is not authorised to speak to the media.
But analysts say raising coal prices will not solve India's
coal, and power, shortages any time soon.
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