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Global coal prices inch closer to CIL’s, cheer to IPPs

Falling of global coal prices by more than 25 per cent in the past six months is likely to bring cheer to the power producers in India. At $ 46 a tonne, imported coal price is inching closer to price of domestic coal sold by state giant Coal India Limited (CIL).

As per Coal India executives, the average price of coal ranges from Rs 900 to Rs 2000 per tonne as per the grade of coal. The average sale price of CIL’s coal across the country is Rs 1,400 per tonne currently.

Including the transportation cost and 25 per cent escalation in amount due to lower grade, the range of average price of CIL would be around Rs 2,500 to Rs 3,500 per tonne, depending on the distance it travels.

Coal sold by CIL is of lower grade with a calorific value of 3,500 to 5,500 kcal, while imported coal has calorific value of 5,550 to 6,500 kcal. The ash content is also low at 2 per cent in imported coal whereas in domestic coal the ash content on an average is 25 per cent.

A senior power executive said plants running on domestic coal can replace at least 50 per cent of their need with imported coal. “Depending on the configuration of the power plant, they can save on cost since heat value is higher in imported coal,” said the executive.

Plants banking on blended coal would now stand to benefit, as per experts. “Even at a blending rate of 30 to 40 per cent of imported coal, if the prices remain at current levels, the demand for imported coal would go up,” said a Delhi-based sector analyst.

Global coal price in 2008 touched $ 130 per tonne. Since then, it has been sliding down from $ 80 per tonne in December 2013 to $ 50 in December 2014. At a forex of $ 62 per rupee, the landing price of coal in India is in the band of Rs 2700 to Rs 3000 per tonne.

The sector experts opined given that as Indian power plants can blend 50 per cent imported coal, there is a strong likelihood that imported coal would replace domestic where the input cost favours imports.

“For power plants based in Gujarat, Andhra Pradesh and other western part of the country, the distance is around 1,500 km and more. The transportation cost is above Rs 2,000 per tonne of coal. In such a case, getting imported coal, which is also of better quality looks viable,” said a power sector executive.

NTPC, which has most of its power plants based at the pit head of the coal mines, there is low transportation cost. The independent power producers face not only transportation cost but loss of around 6 to 8 per cent of coal in rail transit, said a coal industry official.

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