KOLKATA (miningweekly.com) – Coal miner Coal India Limited (CIL) is likely to adjust its pricing in the current financial year.

A price adjustment will need to factor in the re-gradation of the quality of coal from CIL’s 386 mines and the impact of the Goods and Services Tax (GST), a company official said.

Under GST, which will be introduced on July 1, the incidence of indirect tax will be reduced to 5% from a cumulative 12% at present.

The GST will impose a uniform excise duty rate for products and services, across all provinces, subsuming the plethora of taxes and levies imposed by federal and provincial governments in a reformed: ‘One India, One Tax Regime’. Under GST rules, all producers of goods and service providers will have to mandatorily pass on the benefit of lower indirect tax to consumers.

With this provision in place, CIL reckons that the lowering of taxes and its impact on selling prices could trigger higher demand and be an enabler for the miner to reduce its mounting pit-head stock, estimated last month at around 61-million tons, the official said.

However, he concedes that the impact of lower GST is yet to be determined and that CIL and its eight wholly-owned operational subsidiaries are in the process of appointing GST consultants to advise on the implication of the reformed tax on sales transactions, compliance, registration to the GST portal and documentation and filing of tax returns.

This process will lead to assessment of final impact of lower GST on any revision of selling price of coal, the official adds.

However, the positive impact of lower GST will have to be balanced with the comparative negative of CIL’s 386 mines having been regraded by the Coal Comptroller’s Office. Under the revision, grades from some mines have been lowered, while others have been pushed up a few notches.

According to the official, while the monetary impact on sales realisations following this re-gradation is yet to be assessed; at the aggregate level the impact on realisations is expected to be negative, since more mines have been downgraded than upgraded.

The Coal Controller’s Office inspected 871 samples, of which 41% was downgraded, 51% retained grades and only 8% was upgraded.

The grade revision would force the miner to change pricing for coal produced from each of the mines sampled, the official says.

The positive impact of lower GST, revision of grade of coal sampled and the current trend of rising realisations from sales through the e-auction route will make a new pricing regime in the current financial year a “very rigorous and elaborate exercise” and hence, it is too early to predict the direction of the final price, the official adds.