CIL Holds Implementation of New Coal Pricing Method

The decision to implement new system of raising coal sale bills on GCV (Kcal/Kg) basis has been kept in abeyance by Coal India Ltd (CIL). The new pricing method which was to be made effective from 1 Apr’18 has been deferred till further notice.

Historically, the domestic coal structure of CIL was highly skewed and distorted with inconsistent gaps between higher and lower grades. The company had revised the coal prices in Jan’18, aiming to reduce the gap between the higher and lower grades of coal.

During the price revision of Jan’18, CIL had decreased the prices of 7 grades; kept coal price of 1 grade unchanged and had moderately increased the coal prices of 9 grades of coal from the previous revision of 29 May’16. Accordingly, the gradient of decline in price per GCV was made more rational and linear.

Source: CIL

Need for New Billing System:
Earlier, the company was notifying its coal prices in INR/MT, which implies that the customers had to only pay according to per tonnage of coal for the grade they had purchased.

For, instance, if one wish to purchase G4 grade of coal which falls under GCV range of 6101-6400 Kcal/Kg, he would have to pay only a sum of INR 3000/MT. The buyer would pay the same amount for coal having 6200 Kcal/Kg as calorific value, and for the coal having 6400 Kcal/Kg, as both the calorific values were falling under the G4 specification.

The current pricing method was unfair to the actual energy content of the coal, for which CIL had proposed the new billing based on GCV basis. Accordingly, the Pit head ROM prices all grades of coal will be expressed in terms of Rs. /Mcal ( Rupees per Million Calories), which shall remain constant for every GCV falling in a particular grade.

Methodology of GCV Based Billing:
a. Initial bill raised on Median GCV of GCV range belonging to declared grade.

b. Price per Tonne (initial Bill) = mid-GCV * Rs. /Mcal (declared grade)

c. Price per Tonne (for actual GCV) = Actual GCV (ascertained as per the applicable modalities) * Rs/ Mcal (applicable for the grade within which actual GCV falls)

d. The difference between the initial billing in (b) and the final amount payable as per (c) shall be adjusted by way of supplementary invoice of credit note as the case may be.

Illustrations:

Case-I: If the actual calorific value of coal is lower than the declared grade

Consider, actual calorific value of coal comes out as 4500 Kcal/Kg, against the declared grade of G-9 (4601-4900 Kcal/Kg).

Case-II: If the actual calorific value of coal is higher than the declared grade

Consider, actual calorific value of coal comes out as 5250 Kcal/Kg, against the declared grade of G-9 (4601-4900 Kcal/Kg).

Note: 1 Kcal/Kg is equivalent to 1 Mcal/Tonne