Coal India, NTPC end year-old scuffle on coal pricing

Moneycontrol Bureau

Coal India and NTPC, both seem to have ended their year old scuffle pertaining to the alleged inferior quality of coal supplied by the former for the latter’s power plants.

Both state firms have agreed to a common method of calculating price depending on the amount of heat that can be generated by burning a particular amount of coal. Sampling of the fuel will be done by a third party.

Earlier, NTPC had said it will make payment depending on the quality of coal. It had also alleged that fuel supplied by the miner had impurities and paying more for it, was unacceptable. However, the spat came to an end after CIL chairman S Narsing Rao and NTPC's CMD Arup Roy Choudhury met coal secretary Sanjay Kumar to sort out  the differences.

NTPC has over 4,500 megawatt capacity which will now not face fuel shortage, as CIL will ensure adequate supplies for their functioning.

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Earlier, CIL charged customers based on quality,grade and the amount of heat generated from a particular type of coal. This pricing method was called  useful heat value (UHV). But in January 2012, it announced that it will charge as per gross calorific value (GCV), which entails common price for all grades of coal.

This method led to a price rise of Rs 1,500 per tonne to the actualy costing of Rs 1200/tonne.

The price escalation did not go well with CIL's customers and specifically NTPC which is its largest consumer. The power producer has since then took objections to it, which also lead to temporary discontinuation of fuel to it plants.

Shares of Coal India rose 0.54 percent to RS 309.05, NTPC rose 1.12 percent to Rs 140.75.

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