Coal India has achieved a ~7% increase in blended ASP by a ~10% price hike for 75% of volumes without substantially upsetting fuel cost for utilities. Utilities would see a marginal ~4% hike in prices. For the first time, CIL has enunciated the principle of dual prices - no hike for regulated sectors, while a steep 30% hike for sectors enjoying market prices. This has far reaching consequences: as the dual pricing structure becomes the norm, an additional ~20% of CIL’s volumes could move closer to free pricing.
The pricing move has more than mitigated the serious volume disappointment and inflation-linked cost push. Production growth of 1.7% coupled with higher employee costs and pricing revisions result in a 15% and 9% increase in our FY12 and FY13 estimates.
