Examining the Thermal Coal Pricing Policy Currently Existing in India

摘要

About 60% of the power produced in India is coal fired. Compared to international coal prices, the prices of domestic coal are quite low. There is a perception that coal mining and washing suffer from under-investment. Thermal coal in India is sold on the basis of grades. Grades are dependent on heat value of coal with deductions as penalty for high ash and moisture, and for volatile matter less than 19%. Prices are periodically revised in relation to the market prices. There appear to be a number of shortcomings in the existing grade based pricing system. According to some, the system is not rational and defies logic in some cases. Another criticism of the system is its apparent lack of transparency. But everybody seems to agree that the system is out-dated and requires revision. This paper examines the coal pricing policy currently existing in India and indicates in the process the shortcomings, loopholes and deficiencies. Drawing on international experience on thermal coal pricing and specifics of Indian coal scenario, the paper also suggests the qualitative parameters and various externalities, which need to be taken into account for developing a new pricing system for thermal coal in India.