India’s power producers see costs rocket as Indonesia adjusts coal prices

Following Indonesia’s new pricing method for its thermal coal, aligning its rates with international markets under the benchmark prices called the HBA Index, the price of Indonesian coal now surpasses the US$100/t, representing a sudden rise of around 30%.

The surge in coal price is causing a major headache for Indian power producers who depend on imports for more than half national generation. This year, it is expected that India would raise its export volumes from 60Mt to past Japan’s leading 65Mt. However, the latest price rise may force a rethink.

Tata Power’s (BSE: TATAPOWER.BO) executive director, finance, S Ramakrishnan, says his company may face a loss up to $100 million due to the new pricing policy. He says the company will blend the fuel with cheaper coal having low calorific value in order to reduce the cost of generation. The company imports Indonesian coal for its 4000MW ultra mega power project near Mundra.