Coal India (CIL) subsidiary Western Coalfields argues that its proposed 25 new projects with a capital investment of about Rs 4,000 crore would not be viable unless the cost-plus mechanism for pricing of coal is implemented.
Therefore, the subsidiary has asked government to change pricing mechanism from the current nomination-based one to cost-plus one. The Standing Linkage Committee (Long Term) is expected to take a decision on this.
The company plans to develop the 25 new projects in order to maintain the planned production target of 45 million tonne per annum (mn tpa).
However, industry watchers feel that the move to cost-plus pricing may push up prices several times. For instance, coal costing nearly Rs 860 a tonne under the nominated regime may shoot up to Rs 1,500-3,400 a tonne, they said.
Western Coalfields is firm it will not start initial development activities for these projects, or even release land compensation, unless the cost-plus agreement with buyers is put in place.
A few buyers from Western Coalfields — Mahagenco, Indrajeet Infrastructures, Lloyds Metals and Purti Power — are understood to have agreed to pay a higher price for coal.
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