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.
