According to estimates, the new pricing policy brought in by the coal monopoly, Coal India (CIL) will result in the coal to be become dearer by 12-15 % for the state-owned and private power utilities in the country.

Thermal power plants use different categories of coal are expected to feel the pinch with the new pricing policy as CIL increases the categories of coal it offers. The increase in coal prices is expected to result in an increase in power generation cost by at least 40 paisa per unit.

CIL announced its decision to move from "useful heat value" (UHV) based pricing to (gross calorific value) GCV-based price mechanism from the beginning of 2012. The GCV is a internationally accepted pricing mechanism but the UHV mechanism was used in India to consider heat trapped in ash instead of just the heat released by carbon and hydrogen in the coal when it is heated.

CIL was offering the coal in seven categories until December 31, 2011 and is now offering the fuel in 17 price categories. The types vary from the type producing 2,200 kilo calorie to one that produces 7,000 k cal. Each price band differs with 300 k cal from the previous one under the mechanism.

Power plants using coal of B, G and F grades will not be affected with the changes as the coal will cost equal or even lower. However, those plants which ate using other coal grades will be severely affected in the coming days are there will be tough opposition to any increase in electricity for the consumers.