Coal India Gains After Increasing Prices of Some Fuel Gradesby
Net 6.3% increase will add 32.3 billion rupees to FY17 revenue
Coal price change to help pay for salary revision: chairman
Coal India Ltd., the world’s biggest producer, jumped the most in more than three months after raising prices of lower grades of the fuel and cutting rates on higher grades for a net increase of 6.3 percent, the first price revision across all of its production in three years.
“The revision is aimed at both motives of raising demand and covering costs,” said Chairman Sutirtha Bhattacharya in a phone interview Sunday night. “For higher grades, we have reduced the prices to prop up demand from import-parity sectors, while the lower grade increase is meant to pay for increase in expenses, such as wages.”
The stock rose as much as 5.2 percent to 296 rupees, the biggest increase since Feb. 15, and traded at 293 rupees as of 11:37 a.m. in Mumbai. Coal India revises wages for non-executive staff every five years after negotiations with worker unions. The next revision is due July 1.
Most of Coal India’s output goes to power producers, which are key to Prime Minister Narendra Modi’s promise of supplying electricity to every household by 2019. Higher prices for coal, which fires more than 75 percent of India’s electricity generation, may complicate that goal.
The price rationalization shows that Coal India is “capable of taking tough decisions with regard to pricing,” Rahul Modi, an analyst at Mumbai-based Antique Stock Broking Ltd., wrote in a report. The revision will add 18.5 billion rupees to the company’s net income in the year to March 31, he said.
The company said in a filing Sunday it will earn additional revenue of 32.34 billion rupees during the year because of the increase. The company also said it was reducing the premium it charges non-power customers such as cement and aluminum makers to 20 percent, compared with 35 percent earlier.
Demand from power producers, Coal India’s biggest customers, has lagged record output, leading to rising stockpiles at plants and the company’s own mines. The price reduction for the higher grades is part of the company’s efforts to boost demand and keep customers from drifting to imports.