Coal India Ltd. has rolled back prices under the new Gross Calorific Value (GCV) based mechanism that came into effect from January.
On Monday, the Coal India Board decided to reduce the prices in almost all the 17 different bands. A new notification will soon replace the Dec. 31 price hike.
The new pricing will offset the average 12.5% hike proposed under the GCV, announced on December 31.
Coal India had come under pressure to reverse the price hike from consumers in Power and other sectors.
Starting January, the world's biggest coal mining company switched to a new pricing mechanism that links local coal prices with global benchmarks.
In the earlier Useful Heat Value (UHV) method, the pricing was decided on the ash and the moisture content in coal.
"The new pricing will be revenue neutral for the company. Our country is not in a position to increase power prices," Union Coal Minister Sriprakash Jaiswal told reporters today in New Delhi.
"When we made a switch to GCV system, there was perhaps an error by Coal India and prices for coal went up. It could have impacted the cost of power," he added.
He said that Coal India would review the new pricing mechanism based on the impact of the price rollback on its revenues in the January to March quarter.
N.C. Jha, Chairman of Coal India said today that while the company would persist with the GCV system, it was reworking prices to offset a projected 12.5% gain in prices.
Coal India would also have to shoulder a higher than expected burden from a planned new wage pact, Jha said.
The higher wage costs would be about Rs 65bn every year, which the company now says will be absorbed without raising prices in FY12.
"Shareholders also have aspiration for profit, so we will see at the end of March how we can absorb these additional costs - either by increasing efficiency of production or by having a revisit of the pricing structure," Jha said.
Coal India shares ended 2.5% lower at Rs 327.20 on the BSE while the Sensex closed up nearly 2%.
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