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Coal India e-auction: Shortage of coal pushes up prices

17 Feb 2015

Shortage of coal for e-auction at state-run monopoly miner Coal India (CIL) has pushed up prices, with those of certain grades doubling to about Rs 3,000 per tonne in the past one year, while the international prices have been on the decline.

"During the past few months, eauction fetched about 65% premium on average over the prices at which CIL sells to the power utilities. In contrast, at last year's eauctions coal got sold at only about 37% premium," said a senior CIL official.

Coal India sells coal to the power sector at average price of Rs 1,100-Rs 1,200 per tonne. E-auctioned coal fetched about Rs 1,500 last year on average, about a third lower than this year's figure of Rs 2,000 per tonne.

CIL sells various grades of coal with varying energy content. The higher the energy content the higher the price. Prices of premium grades of coal with high energy content fetched at least Rs 3,000 per tonne this year, compared to Rs 1,600-Rs 1,700 per tonne last year.

"The rise in the number of fuelsupply agreements signed with power companies resulted in higher supplies to power utilities, reducing availability for e-auction.

Shortage on the back of increased demand pulled up prices," said the official cited earlier.

Fuel supply agreements are coal supply contracts required to be signed with power companies.

CIL's first priority is to supply coal to the power sector. It can offer coal on e-auction only if it has adequate volumes after meeting the power companies' requirements.

Between April 2013 and January 2014, CIL sold close to 47 million tonnes through the electronic auction platform. This fiscal, the monopoly managed to make available 33 million tonnes of coal during the first 10 months.

Income from coal sold through eauction is a sizeable portion of CIL's profits, which took a hit in the third quarter of the current fiscal. "We sold some 5 million tonnes of coal during the third quarter of the current fiscal. It was about 8 million tonnes less than that in the corresponding period of the previous fiscal. This pulled down our profits," the official said.

Nonetheless, coal stocks in power plants have touched comfortable levels of 17-18 million tonnes, the official said, adding that this allow the company to increase volumes for e-auction during the fourth quarter and thereby help the net profit in the quarter to March.

Source: The Economic Times