Coal India benchmarks premium coal to foreign rates

State-owned Coal India Ltd, the world's largest coal miner, will increasingly benchmark its premium grade coal to world prices, a company official said, a move that could be seen as a step towards energy pricing deregulation.

"A decision has already been taken that premium coal should be priced on import parity basis. That is, import price minus 15%," AK Sarkar, director of marketing, told Reuters.

He said some coal sold by its unit, Eastern Coalfields, was being based on the new formula since last October.

Currently, most coal prices are heavily discounted by the state miner that produced 87% of India's total production of 531 million tonnes in 2009-10, as the government wants to keep power costs down and encourage industrial growth.

The company, which has led India's hunt for coal assets overseas, is set to launch an IPO for a listing by August. The sale of a 10% stake is expected to raise roughly $2.7 billion, depending on the valuation, in what would be the biggest share sale by a state firm this year.

Analysts say large scale imports of coal to feed energy-hungry India and sector reforms on the government's agenda were paving the way for bringing prices in line with world markets.

Sarkar said the benchmarking process would be expanded, but he did not give a timeframe.

"We will take it forward. We are already in dialogue with some of our companies," he said.

On Wednesday, a Press Trust of India report published in Financial Express quoted coal minister Sriprakash Jaiswal as saying that domestic coal will be brought on par with global rates.