CIL implements new pricing strategy, slashes e-auction reserve price

KOLKATA (miningweekly.com) – Reacting to oversupply pressures and rising stockpiles, Coal India Limited (CIL) has taken the first step to adjust the price of coal and meet the volume demand of consumers.

In a significant change in pricing strategy, Western Coalfields Limited (WCL), a wholly owned subsidiary of CIL, has decided to reduce the reserve price of coal sold through e-auctions to attract higher-volume bids from consumers.

Instead of pegging the e-auction price 20% higher than the notified price for coal supplied to thermal coal plants under supply agreements, WCL has decided to peg the reserve price for e-auction at 20% less than the notified price.

The benefit of a lower price would apply to both e-auctions and forward e-auctions for captive and noncaptive power plants, WCL said in a statement.

Last month, Mining Weekly Online reported that CIL had slashed the price of high-grade coal by up to 40%, also scrapping the system of charging consumers a premium once supplies exceeded 90% of contracted volumes under fuel-supply agreements with large consumers.

To cope with rising production and stockpiles, CIL now planned for a higher-volume offering of up to 120-million tons through e-auction sales during the current fiscal year, which was expected to benefit captive and noncaptive thermal power producers by ensuring there were fuel supplies without the need to get into long-term fuel-supply agreements.

Responding to oversupply in the market, CIL was forced to prune its April dispatch to 42.5-million tons during April, which was about 1.5-million tons lower year-on-year. Stockpiles at its pitheads during April were estimated at 53-million tons, only marginally down from the 55-million estimated tons in January.

CIL officials said that, while increasing production from the company’s mines would not be difficult, the current priority of the miner was to hasten liquidation of existing stockpiles, as there had been several incidents of stocks self-igniting during the peak summer temperatures and heatwave conditions in several parts of India.