This, therefore, is one important core sector which will have a very high impact of the budget proposals on the prevailing prices. This in turn will have cascading impact on various other industries like power tariffs, steel and cement among others using coal as one of the major raw material.The union budget's proposal has announced a hike in import duty slab of five per cent to 15 per cent.

Add to this, the 10 per cent surcharge (nil earlier) and the existing four per cent import duty in lieu of sales tax. All these levies would result in total import duty of 21.6 per cent compared to 19.6 per cent earlier. With the rise in the price of imported coal, the domestic manufacturers (mainly in the public sectorCoal India and its subsidiaries) can also contemplate to raise its pricesacross the board for all catogeries of coal produced by them.

Similarly, there has been a 10 percent rise in the freight cost for transporting coal over the railways. This however, will depend on the distance of transport involved.

Since it is impossible for consumers to transport coal through roadways -- competitor of railways -- the immdeiate impact would be rise in the cost to the enduser. For a consumer such as BSES which gets coal from Andhra Pradesh, the actual coal cost is Rs 400 per tonne while the transportataion costs work out to Rs 900 per tonne.

With the transporataion cost rising by 10 percent, the overall cost to the consumer would rise by a minimum 6-7 percent depending upon the distance of the mines from the factories.

A few months back, Indian producers were importing/buying coal at $48 per tonne (CIF prices). Currently, the producers would not be paying more than $48 per tonne (CIF) as the prices have slid to rock bottom in the international markets.

The latest reported deal incoal was negotiated at $28 per tonne (FOB) of Austarlian coal for Japenese company. The coal sold had a very low ash content and the calorific value of 6,400 Kcal per tonne. With change in the duty strcuture, coal would attract an import duty of 15 percent with additional surcharge of 10 percent coupled with four percent duty in lieu of sales tax. This effectively results in total duty strcuture of 21.6 percent against an earlier effctive import duty of 19.5 percent.

Considering that the Indian companies pay $2-4 premium to the Japanese rates (because their purchases are for lesser quantities), the price for Indian manufacturers should be in the range of $39 to $41 per tonne (FOB).