[Economy Q] Effect of Coal prices on WPI (Whole sale price index)

Q. How does increase in price of coal by Coal India affected the WPI?

Ans. When coal becomes expensive, the electricity by thermal power stations becomes expensive. And freight railway charges also increase.
That has snowballing effect on everything because

1. Now factory owners have to pay more electricity-bill while producing same amount of stuff,
2. They’ve to pay more money to trains while getting same amount of items transported.
3. Steel, aluminum, cement, glass etc industries also require coal during manufacturing process.
4. So, they’ve to increase their product-price to keep the profit margin same.

And coal price itself is counted in WPI, with about 1.7% weightage.
Thus Whole sale price (WPI) increases when coal becomes expensive.