The CEO of Coal India suggests that fuel costs may be related to inflation

23 Jun 2023 , 11:46 AM

According to Pramod Agrawal, chairman and MD of Coal India Ltd who talked to ET, the company may create a mechanism whereby future rises in coal prices might be correlated with inflation or other factors in order to prevent abrupt hikes.

‘We are devising a mechanism through which sudden increase etc. will be done away with and will be linked with parameters so that smooth price increase can happen in the future,’ he added, adding that the timing of this has not yet been determined.

The cost of domestic coal used to produce electricity has not changed in the previous five years. Fuel price increases have a direct impact on power costs and are typically passed on to consumers.

All parties involved must support a price rise for the power sector, he said.

‘As an increase in coal prices will have a cascade effect on many commodities, we will adopt a balanced approach taking stakeholders into account. Protecting our EBITDA and insulating the country from the effects are the goals, he said.

The price of higher grades of coal, which are mostly utilized in the cement, fertilizer, and sponge iron sectors, was raised by the state-owned corporation last month. 78% of its production is sold to the power industry, while coal prices remained unaffected.

The price of coal for the electricity sector is around 17% less than what is provided to the other industries.

However, Agrawal added that since the company’s fixed costs are large, any increase in output has a positive impact on its bottom line. Volume sales also contribute in profit maximization.

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