Price Escalation Verification Report

Abstract

At the request of Coal India Limited (CIL) the “Price Escalation Verification Project” has been undertaken by a team of the Economic Research Unit, Indian Statistical Institute. The project examines the escalation clause associated with the price index formula to be used in contract agreements between CIL and Mine Developers. The existing formulae for price escalation, both for open cast and underground coal mining, have been examined and certain modifications along with justification have been proposed. Using illustrative examples, it is found that the suggested escalation formulae have significant impact on the final prices.