A number of Indian electricity companies (both small and large) have been hit hard by the rise in the coal prices of Indonesian coal. The price hike has adversely impacted the power plants of India which are now facing problems of increased cost.

KC Venugopal, the Energy Minister of India, has blasted this price hike by citing that it has created a plethora of problems for the nation’s electricity companies. Despite many of the Indian electricity firms possessing shares of the Indonesian coal mines, they cannot get the coals at lower rates. This is owing to a coal price margin set by the govt. of Indonesia.

This regulatory move by the Indonesian govt. has been facing flak from some quarters who feel that such a stringent policy has compelled the entrepreneurs to make adjustments to their contracts.

Supriatna Sahala, the executive director of the Indonesia Geothermal Association, has stated that the root of this problem can be traced back to September, 2010, when a lowest coal price reference was set by a govt. regulation. Prior to such a regulation, the Indian companies could buy coals at US $30 per ton (4200 calorie coal) which was a little below the reference price. But after the regulation, they are compelled to buy the same coal at the rate of US $53 per ton.

However, this regulation is not going to hurt the coal businessmen from Indonesia since majority of the coals exported to India are low-calorie ones and hence, they are unlikely to lose business.