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Plan panel's coal auction proposal finds few takers

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Sudheer Pal Singh New Delhi
Last Updated : Jan 20 2013 | 7:34 PM IST

The Planning Commission’s proposal to hike the quantum of coal sold through e-auction to 20 per cent of total production, from the current level of 10 per cent, seems overambitious. Industry officials say there has been a sharp decline in the offtake of e-auctioned coal due to rise in the prices in the recent past.

“While coal companies are making profits, the purpose of e-auctioning, as envisaged by the commission, is not being served at all,” said a senior official from the Planning Commission.

The e-auctioning scheme was launched by the government over three years back with a view to provide the dry fuel to the non-core sector and traders at a market-determined price. However, the higher price has pushed away many prospective buyers.

“E-auction prices are exceptionally high — at least 60 to 70 per cent higher than the controlled price. It has become difficult for buyers to afford these prices,” said a senior analyst from an accounting and consulting firm.
 

COAL AUCTION TRENDS
 2007-082008-09
(Apr-Dec)
Coal offered for 
e-auctionby
Coal India Ltd
33.92 mt66.18 mt
Quantity
allocated
28.79 mt33.15 mt
Source: Monthly Performance Report, CIL

Bulk of the coal offered for e-auction is from Coal India Ltd (CIL), the state-owned coal production monopoly.

Another issue with the auction is the quality of the stock on offer. “People are not lifting the coal as some stocks are not even worth considering,” said the official.

Planning Commission member Kirit Parikh said he had been concerned about the fact that not even 10 per cent of the total coal production was being lifted through e-auction, owing to the reluctance of companies to pay the higher price.

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The data published by CIL show that in the nine-month period ended December 2008, the company offered over 66 million tonnes (mt) of coal for sale through e-auction, but only 50 per cent of this amount — 33 mt — could be allocated to companies. This is about 12 per cent of the CIL’s total coal production between April and December 2008. Last year, however, the company could manage a monthly allocation of over 85 per cent of the fuel offered through electronic trading.

“The purpose of e-auction was to determine a representative market price. It was not aimed at profiting the coal companies,” added the Planning Commission official.

The over 33 mt of coal allocated by CIL through e-auction in the initial nine months of the current fiscal was sold at a price 60 per cent higher than the notified price for different categories of coal. “While the average domestic price of coal is around Rs 1,200 per tonne, it is being sold through e-auction at a price of around Rs 1,900 per tonne,” the official said.

Earlier too, the higher prices realized at the e-auction had acted as a stumbling block for the scheme. In fact, in December 2006, the Supreme Court had dismissed the scheme as being a misuse of CIL’s monopoly status to seek the highest price rather than fulfilling its constitutional goals.

This was followed by the government scrapping the floor price for bidding under e-auction in the new coal distribution policy notified in October 2007. Instead, it had fixed the notified price as the floor price for sale of domestic coal. E-auctioning had resumed in November same year.

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First Published: Mar 06 2009 | 12:17 AM IST

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