CIL to broaden coal auction; power companies in focus

30 January 2017

A CIL official reported that some plants are flush with coal while some others have neither coal supply nor power purchase agreement. In some cases, they have coal supplies but do not have power purchase agreements with distribution companies. Also, some plants have the letter of assurance for coal supplies and have signed power purchase agreements but not getting the fuel. According to norms, plants with only valid power purchase agreements are entitled to get coal but in many cases plants with valid power purchase pacts are coal starved due to which they are unable to produce power and keep their supply obligation.

“We are trying to broaden the e-auction window so that it boosts demand and cuts down on the inventory cost of buyers. We will now allow lifting coal beyond one year of the purchase through e-auction, which, at the prevalent scheme, is allowed up to six months of the purchase. While this will help book larger volumes, users can lift whenever they want,” the CIL official said.

In fact, CIL was trying to improve on the demand of coal, which otherwise brought a tepid response to the e-auctions in 2016.

While the ministry didn’t agree that there was over supply of coal last year, it said the excess availability was because of the power plants operating at low PLF.

The ministry also adopted a 20% add on formula on fixing the floor price of coal above the notified price for e-auction for which there was less premium. However, the ministry cited that there was a 15% drop in imports, which saved R2,300 crore worth of foreign exchange.

According to mjunction CEO Vinay Verma, the average price gain over notified price during FY16 was 31.69%, while CIL could sell 14.81% through e-auction during the period.

CIL conducted 188 spot e-auctions, 13 forward e-auctions, 27 special forward e-auctions and 11 exclusive e-auctions as a new initiative during FY 16.

While Verma agreed that bringing about equilibrium in supplies to the power sector was important, he added that with larger availability of coal, small and non-core consumers like paper, ceramics, brick kilns and others – which were coal starved for years – got coal to their requirement. The situation would continue to remain so this year, Verma felt.

Subhasri Chaudhuri of the Coal Consumers Association of India felt that the recent upward revision of washed coking coal was linked to the prices of international coking coal.

Bharat Coking Coal hiked prices of washery 3 grade coal by 52% and washery 4 grade coal by 25%, which was directly linked to power utilities. Central Coalfields prices were linked to steel and a 99% increase – which put the price to R11,500 per tonne from R5,780 per tonne – would only encourage imports.

Source – Financial Express