Coal auction may be allowed

Firms may get to charge higher from non-core customers

Non-core consumers of coal may have to pay a higher price for the fuel. The government is likely to permit Coal India Ltd and its subsidiaries to sell 5 per cent of their coal production through e-auction to consumers other than those in power, cement, and iron and steel sectors.

Senior officials told Business Standard that a committee of secretaries headed by Cabinet Secretary BK Chaturvedi, in a recent meeting, had approved the proposal. CIL will be making a presentation to Prime Minister Manmohan Singh shortly on its experience with two rounds of e-auctioning.

Five per cent of coal production will roughly amount to 15-20 million tonne annually.

"The e-auction route is not favoured for core sectors. Power plants which consume about 77 per cent of domestic coal cannot be exposed to auctioning since they operate in a regulated price regime and, therefore, it is being restricted to non-core consumers," said an official.

Bharat Coking Coal Ltd (BCCL) started e-auctioning of coal as a pilot project in November. It restricted the sale to only rail borne registered customers but the second round in February was opened to all non- core sector consumers and non-linked customers including traders.

This was done with a view to giving equal opportunity to all taking part in the e-auction for buying coal and coal products at market determined prices, said an official.

BCCL auctioned 1.32 lakh tonne coal in the first round during which the company earned 15 per cent more than the administered price adding Rs 1.4 crore to its profit.

Following the BCCL board decision in January 2005 to extend the second trial to all non core sector consumers as well as non-linked customers including traders, the company received 350 bids. The second round of auctioning took place for 7 lakh tonne. Another CIL subsidiary North Eastern Coalfields also carried out e-auctioning in the second phase.

BCCL made a profit of Rs 13 crore amounting to 40 per cent more price realisation than the normal administered route in the second round, said a coal ministry official.

Small consumers of coal have written to the coal ministry protesting against e-auction stating that it needs to be adopted for bigger consumers since they have the option of importing coal.

The present policy differentiates between core and non-core consumers as far as allocation of coal is concerned.

Core consumers, identified through a government notification as power, cement, steel and iron producers, are allotted linkages by an inter-ministerial linkage committee.

Among the non-core consumers priority is given to those with state government sponsorship. The remaining coal is tendered through an open sales scheme under which CIL sells about 5 mt annually.