Higher coal prices to hit profit margin of Sponge iron units

The profit margins of most energy-intensive industries such
as cement, aluminium and sponge iron will come under pressure in the March
quarter with Coal India implementing its new pricing policy.

Most of the company in the non-core sector has coal-based
captive power plants, the fuel cost of which would rise under the new system.

For instance, power costs account for about a fourth of the
total smelting cost of a primary steel producer and coal cost increase would
exert pressures on its profitability of operations, said an analyst.

The impact on the power sector is expected to be mixed,
depending upon the grade of coal a company buys.

CIL has brought in uniformity in pricing of non-coking coal
produced at different mines by its subsidiaries, as against the earlier
practice of subsidiary-wise and mine-wise differential prices. Only coal
produced by Eastern Coalfields would command a six per cent higher price over
the rates notified for others.