The selective increase in coal prices effected by the public sector Coal India Ltd (CIL), since the midnight of February 26, is likely to hit power plants in the South and the East, although the power sector was spared an across-the-board increase in prices.

In a complex three-layered price revision, CIL announced a 30 per cent increase in prices of coal to all unregulated sectors, whose product-prices are driven by the market. Thereby power, fertilizer and defence sectors were kept outside the purview of a straight hike.

However, prices of all grades of coal produced by CIL subsidiary Mahanadi Coalfields Ltd (MCL) based in Sambalpur in Orissa has been increased. This is expected to directly impact power plants in the South — Tamil Nadu Electricity Board and APGenco — besides those in West Bengal — West Bengal Power Development Corporation Ltd and CESC — besides NTPC (Talcher unit in Orissa).

MCL, which was carved out of another CIL subsidiary, South Eastern Coalfields Ltd in 1992, produces only E and F grade coal used by the power sector.

Unable to sell its products in a sluggish market it was forced to lower its price. This anomaly has now been removed with MCL prices being brought on a par with SECL, through a 20 per cent increase. This formed the second layer of the increase.

The final part of the price increase is through a 100 per cent increase in the superior A and B grade has been announced. This affects only those power utilities which use these grades owing to their technologically handicapped older generation plants. This covers CESC and WBPDCL too.

While CIL has said that the overall impact on the wholesale price index would be 0.17 per cent and that on the power sector would be 7 paise per kwh, the owners of some of the utilities have already gone on record to say that they may need to approach the respective electricity regulators for a tariff hike.

The company also said that the rise would rake in additional revenue of Rs.650 crore this fiscal and Rs.6,200 crore in a full year.

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