Industry Updates 06th June 2012





Global coal prices cool, but weak rupee worries importers
Power companies that use imported coal have got a respite from skyrocketing fuel costs as international coal prices have softened considerably, and are projected to fall further, but the depreciation of the rupee has limited their gains. 

The coal price index for Australian coal, popularly called the NewCastle Index, and an Asian benchmark had jumped 92% between April 2009 and March 2011 to touch 127.87, but has cooled off to 98.24 last month, dropping 23% over the past year, including a 14% decline since May. API4, the index for South African coal, mirrored the trend.

Experts believe that the prices may decline further in the months ahead, making it easier for Indian power generation companies that are reeling under short supply of coal from Coal India. Power producers such as NTPC, DVC and the Adani group say that generation cost in the past few months has declined by up to 5 paise per unit as the rupee's depreciation limited the benefit of cheaper coal.

"Rough estimate shows that the cost of generation will go down by 2-3 paise for every unit of power generated," an Adani Power official said. A senior NTPC official said: "Although international coal prices have declined, a rise in rail freight and substantial depreciation of the rupee have negated some of the declines for Indian companies. Nevertheless, taking into consideration all the factors, cost of generation has declined by 4-5 paise per unit."