Coal fetches 102% premium in e-auction, surpassing the earlier highest of 95%

5-Nov-2018

This price discovery is owing to the demand-supply mismatch, although coal production has achieved a double digit growth during the first six months of the fiscal.

Coal prices have received a premium of 102% in spot e-auction during September 2018, surpassing the earlier highest of 95% premium during the spot e-auction in October 2017.

This price discovery is owing to the demand-supply mismatch, although coal production has achieved a double digit growth during the first six months of the fiscal. In the first six months coal production grew 10.6%, according to CIL statistics. But this could not match the high coal demand due to rise in power production, lower hydro power generation as well as growth in production levels from non regulated consuming sectors like cement, aluminium, steel and paper.

A section of coal ministry officials suggest leakage in mechanism for which coal shortage is persistent in the power sector despite increased supply.

However, non power consumers, not getting linked coal are compelled to take costlier e-auction coal thereby losing cost efficiency in production. Further the woes are added by having to carry coal by the road mode with no additional railway rakes being allotted.

Carrying coal by road is almost 4 times costlier than carrying coal by rail and thereafter coal is being offered from such location, which doesn’t seem feasible for lifting. “A company in Maharashtra is offered coal from the mines of Eastern Coalfields in West Bengal, whereas West Bengal Power Development Corporation has to bring coal from the mines of Mahanadi Coalfield,” a non power consumer on the condition of anonymity said.

This has been true even for the power producers since the extra coal, the sector has been recently offered, has to be taken by the road mode, a CIL official said.

However, a ministry official pointed out that while the state gencos and the state agencies are being supplied coal above their quota by an order of the coal ministry in June this year, the utilisation of this coal is not known. Citing West Bengal Power

Development Corporation he said, while most of the units are shut down and the state distribution company is sourcing power from the exchange, there is no dearth of supplies of coal to WBPDCL. But there are reports of power supplies tripping, which should not be the case.

However, CIL said it has increased coal supplies to West Bengal’s generation company to meet increasing demand during the festive season.

According to an ICRA report, during the just concluded monsoon season, domestic coal production growth slowed down to 3.8% and 3.2% in September and August respectively, against 10.6% in July and 13.2% in June. This lead coal stocks at power plants to steadily deteriorate from a high of 21.1 million tonne (mt) in July end to an estimated 15.8 mt in end of September.

Source: FINANCIAL EXPRESS