The January 31 correction in coal prices has brought the ailing Eastern Coalfields Ltd a wholly owned subsidiary of Coal India Ltd, to the brink of financial losses. On the brighter side, however, it has improved the prospects of a reduction in electricity tariff by power producers, especially those based in West Bengal who use ECL thermal coal.

A close scrutiny of prices of ECL coal both the pre-existing useful heat value based product list till December 31 and the latest gross calorific value based price list (effected from January 1) indicates that, excluding the erstwhile A and B grades, ECL stands to fetch lower prices for the rest of the product range.

This indicates that the company's revenues from large opencast mines at Rajmahal, Shonpur Bazari and others so far considered to be money spinners will now be earning less revenue, creating further pressure on finances (since it is) over burdened with a large number of loss making underground mines. Interestingly, a lower price for ECL coal would lead to lower royalty earnings for the West Bengal Government. The calculations may be reserved only if the revenues from erstwhile A and B grade increases proportionately, as those prices have actually gone up. A grade slippage, during the actual despatch, however, will only add to the woes.

Incidentally in the new price regime, between 3 grades (each separated by 300 kcal a kg bandwidth) between GCV 5500 to 6400, prices vary from INR 1,450 a tonne to INR 3,970 a tonne, indicating distinct possibilities of major revenue loss in case of grade slippage.

(Sourced from BL)