Drop in global prices of low-quality coal: CIL, Indonesian coal price gap halves to 15%
KOLKATA: The difference between landed cost of Indonesian coal and a similar category of coal supplied by Coal India LtdBSE -0.77 % (CIL) has reduced from 30-40% a year ago to about 15-18% for low quality coal following a drop in global prices.
When it comes to premium quality, CILBSE -0.77 %coal is costlier. However, if the actual quality of coal supplied to power plants is considered, all categories of CIL coal are costlier.
"For certain grades, CIL's coal is in fact turning out to be costlier than its equivalent imported version because of grade slippage and stones that come mixed with the coal," said a senior power official from a West Bengal company who did not wish to be named. A senior NTPCBSE 0.24 % official had a similar take. He said, "The amount of stone that comes with coal from CIL makes it really difficult for us to find grounds to dispose off these boulders."
Washed and crushed thermal coal, ready to be transported from the Indonesian mines is now cheaper than the base price of raw coal produced by Coal India for the same grade. The only difference in price is the transport cost from Indonesian mines to power plants in India, which may be wiped out if CIL raises prices again.
CIL chairman S Narsing Rao said, "I am really not aware of the international coal prices. However, 48% of CIL's coal production costs include labour costs. Legacy mines also add to the costs. Foreign mines are much more mechanized than CIL and they have the right number of employees which is less than CIL's." He agreed that stones were supplied with coal sometimes to power plants that created quality issues and reduced the GCV of the coal. GCV is a measure of the energy released by burning a kilogram of coal and is considered globally a unit of energy content of coal.
Coal extracted from mines is raw coal. When washed and crushed to a definite size it is suitable for power plants and fetches higher prices. At present, the base price of Coal India's raw coal is a tad costlier than washed and sized Indonesian coal of the same category.
"Indonesia is now producing coal at almost half the cost at which CIL produces. Raw coal produced by Indonesian mines of about 5300 gross calorific value (GCV) costs around $13 (around Rs 712 per tonne) at the higher end. CIL is selling this coal at a base price of Rs 1,270 per tonne to the power sector - nearly double the cost. However, if consumers are buying from Western Coalfields they pay even more at Rs 1,520 per tonne, as the base price - is nearly double the price," Gautam Kumar, director Asian Minerals told ET.
"The actual price paid by a customer on CIL's coal is at least 40% more than the base price because power companies pay a royalty of 40% in some states and some CIL subsidiaries like Eastern Coalfields charge 40% extra on the base price," the power official quoted earlier said. "We have calculated that 1 kilo calorie of energy costs about Rs 1.10 for coal supplied by CIL. This cost a little less than Rs 1 per kilo calorie for Indonesian coal," he concluded.