State-owned Coal India Ltd (CIL), which suffered a profit drop in fiscal 2006-07, feels it should raise prices but is refraining from doing so as that would have an adverse impact on inflation, which is already hovering around the 6.5 per cent level.

Speaking to reporters here today , CIL Chairman and managing director Partha S Bhattacharyya pointed out that coal prices have not been revised since 2004 and with costs increasing, the PSU’s profits have taken a hit. Coal India’s pre-tax profit is expected to decline from Rs 8676.72 crore in 2005-06 to Rs 8212.69 crore in 2006-07.

Bhattacharyya noted that the lower profits in the just completed financial year are primarily the result of “of non-revision in coal prices because of which the inflationary impact on costs remained uncovered”. The drop is also partly due to the “imposition of a stay by the Supreme Court on the e-marketing of coal”, he added.

Coal prices have a pronounced impact on the price level through their direct impact on power tariffs, which in turn have a significant indirect impact on prices of other commodities. CIL has almost a total monopoly on the supply of coal in India. Since the pricing of coal has been decontrolled, the company is entitled to decide independently the timing and quantum of any price revision. Bhattacharyya assured that the company would take any price hike decision very carefully, keeping in mind the overall impact it would have on the economy but made it clear that the current price line cannot be held too long. Coal India has carried out some internal calculations on the necessary and feasible quantum of price increase.

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