CIL to offer higher volumes at coal auctions

KOLKATA (miningweekly.com) – In light of there being sufficient coal stocks at thermal power plants across India, producer Coal India Limited (CIL) has been granted greater flexibility in offering higher volumes for sale through e-auction.

The option to increase sales volumes through e-auction would enable the miner to fetch higher realised prices than from supplies to thermal power plants, which were at "notified prices". It was expected that prices from auctions would averaged about 50% higher.

The Power Ministry had initially opposed CIL’s plans to increase volumes for sale at e-auction, arguing that it would lead to a crunch in coal supplies to thermal power plants. The Ministry was, in fact, so opposed to the scheme that it last year reduced the ceiling on volumes for auction to 7% of total sales of CIL, down from 10%.

However, in its latest notification, the Coal Ministry permitted the country’s largest miner to offer 10% of its total sales volumes for e-auction, although CIL officials said the figure was just indicative and that it would have the flexibility to increase e-auction volumes beyond 10% now that stocks at thermal power plants have improved substantially.

According to data sourced from Central Electricity Authority, coal stocks at thermal power plants across the country was currently averaging at around 22 days consumption of fuel, up from barely four days consumption a year ago.

Stocks at about 100 thermal power plants were comfortable largely owing to CIL achieving a 9% increase in production during April to September to 229-million tonnes compared with the corresponding period of the previous year, a CIL official said.

With pressures to maintain supply to thermal power plants easing over the past few months, CIL would steadily step up e-auction volumes to increase realisations, the CIL official said.

In 2014/15, following a government directive to reduce volumes put up for sale through e-auction, CIL’s sales through the route was down 50% at around 25-million tonnes. But now with easing of such restrictions, the miner was aiming to increase e-auction sales to 50-million tonnes over the next six months and gradually take the volume up to 100-million tonnes wherein its realizations were expected to increase anything in range of 40% to 65%, depending on grades of coal, the official said.

Small thermal power plants and captive electricity generators were primary bidders at CIL e-auctions as their electricity production were outside the price control regime as in case of other larger utilities and were able to pass on higher cost of coal procured at e-auctions in their power pricing.