New Delhi: Coal India Limited's new mechanism regarding non-coking coal prices will lead to the rise in power tariff and is expected to significantly impact the steel and cement units across the country.

Most of the companies in non-core sector have coal-based power plants, the fuel cost of which would rise under the new system. Keeping this in mind Union government has asked CIL to increase coal prices in phases.

However, from January 1, CIL will shift to new pricing mechanism based on the GCV of coal. Under this system, coal prices will be linked to actual calorific value or quality of coal. While, the price of cooking coal will not change.

In a letter sent to Coal India, Coal Ministry has requested CIL to review its decision on price rise. The Finance Ministry too is opposed to the idea of increasing coal prices.
While the PMO and Planning Commission are supporting the price rise, Coal India has already said that it will not revert its decision on price rise.

State-run power major NTPC which is already struggling due to lack of availability of coal, opposed CIL's new pricing mechanism, asserting that it could lead to an increase in its generation costs by about 40 percent.

According to NTPC officials, “Coal India fulfills 73 percent of the total demand of fuel required for numerous power plants in the country and therefore, price rise will directly affect these plants.

According to Industry sources, the new prices of coal will increase the production cost of steel, aluminum and cement companies.

Aluminum companies approximately spend 33 percent of the total production cost in getting fuel in the form of coal and due to the increase in prices, their end products are likely to get costlier.

Cement and steel companies will also follow the same trend thereby leading to overall rise in inflation.