Coal India subsidiaries get power to set floor price for e-auctions



Coal India’s board has empowered subsidiaries to fix their own floor prices for e-auctions, which is expected to help the monopoly get higher rates.

Earlier, it had fixed a ceiling for floor prices. It was 20% for non-power consumers and 10% for power. “Subsidiaries have also been empowered to fix the periodicity of these e-auctions depending on market forces,” a senior Coal India executive told ET.

Western Coalfields, a subsidiary, has been empowered to fix its reserve price on the basis of the cost of production of coal. Many of its mines are underground and have higher costs compared to other mines.

Coal India has told its consumers that the upper cap is being removed immediately.

The executive said subsidiaries are now free to fix any floor price, which could be more than 20% for non-power consumers and 10% for power consumers. If demand for a particular source of coal is very high, Coal India subsidiaries are now free to fix prices that could fetch them additional revenue.

It may help Coal India improve realisations from e-auctions because coal supplied through e-auctions is always in demand from various segment of buyers who do not have a steady supply contract with Coal India.

However, it is still cheaper than imports. Also, smaller consumers do not have the wherewithal to import coal.

At present, there is a shortage of coal availability in the international market due to rains in Indonesia and rising demand from China. This has helped the company realise better margins from spot e-auctions this year. The company is estimated to have earned a total revenue Rs 12,000 crore till December 2017from e-auctions. It earned around ₹9,721 crore in the previous corresponding period, an expected 23% rise.

It sold an estimated 70 million tonnes in April-December 2017 through e-auctions, getting an average of ₹1,600 per tonne.

In the year-ago period, it sold 64.71 million tonnes at an average of ₹1,502 per tonne. “We hope to sell close to 100 million tonnes through e-auctions during 2017-18,” another Coal India executive said.

The company’s average realisations from e-auction rose in tandem with rising international rates. During the second quarter of 2017-18, average realisation was ₹1,614 per tonne against ₹1,337 per tonne in the previous corresponding period, which is a 20% rise in realisations.

Average realisation in the third quarter of the current fiscal has already crossed ₹1,650 per tonne and is expected to touch ₹1,700 per tonne by December 2017 end against ₹1,500 per tonne in the previous corresponding period, an expected 13.5% rise.

Source: THE ECONOMIC TIMES