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Coal India (CIL) was at loggerheads with the coal ministry around six months ago over the latter's directive to halve its lucrative e-auction volumes. It finally settled for keeping its e-auction sales to seven per cent of the total sales.
Now, the ministry has allowed CIL to revert to the old system, removing the cap on e-auction volumes with effect from April 2015. This might boost the miner's bottom line in the coming days.
“The coal ministry has issued a directive to revert to the old system on e-auction volumes,” Coal India chairman and managing director Sutirtha Bhattacharya told Business Standard.
According officials, this means Coal India will now be able to increase its e-auction volumes to 10 per cent of total sales, which was the standard practice.
“However, there is no hard and fast rule. It has gone beyond 12 per cent earlier. But yes, CIL's first priority is to supply coal to the power sector,” said an official.
For example, out of the total sales of 472 million tonnes (mt) of coal in 2013-14, 58 mt was sold by CIL through e-auctions. However, in September 2014, coal minister Piyush Goyal (pictured) directed CIL to cut down e-auctions by about 50 per cent to 25 mt in 2014-15 from 58 mt last year.
After initially opposing the move, Coal India finally agreed to lower its e-auction volume to about seven per cent of its sales.
Coal India ended FY15 selling about 45 mt coal through e-auction. This removal of cap might boost CIL’s profitability as auctioned coal fetches 35-65 per cent more than notified prices. While e-auction sales accounted for one-10th of its sales volume before the coal ministry put a seven per cent cap in September 2014, it contributes almost 40 per cent of earnings before interest and tax. Smaller power firms and non-power users are the primary takers of e-auctioned coal as most of the electricity generation firms do not bid aggressively in view of tariff caps.
One of the reasons behind the coal ministry removing the cap seems to be the rising pit head stock of CIL. The company’s off-take for 2014-15 was lower than its output at 489 mt and the pit-head stock went up to 53 mt at the end of 2014-15, compared to 47 mt in the previous financial year, owing to evacuation issues.
Now, the ministry has allowed CIL to revert to the old system, removing the cap on e-auction volumes with effect from April 2015. This might boost the miner's bottom line in the coming days.
“The coal ministry has issued a directive to revert to the old system on e-auction volumes,” Coal India chairman and managing director Sutirtha Bhattacharya told Business Standard.
According officials, this means Coal India will now be able to increase its e-auction volumes to 10 per cent of total sales, which was the standard practice.
“However, there is no hard and fast rule. It has gone beyond 12 per cent earlier. But yes, CIL's first priority is to supply coal to the power sector,” said an official.
For example, out of the total sales of 472 million tonnes (mt) of coal in 2013-14, 58 mt was sold by CIL through e-auctions. However, in September 2014, coal minister Piyush Goyal (pictured) directed CIL to cut down e-auctions by about 50 per cent to 25 mt in 2014-15 from 58 mt last year.
After initially opposing the move, Coal India finally agreed to lower its e-auction volume to about seven per cent of its sales.
Coal India ended FY15 selling about 45 mt coal through e-auction. This removal of cap might boost CIL’s profitability as auctioned coal fetches 35-65 per cent more than notified prices. While e-auction sales accounted for one-10th of its sales volume before the coal ministry put a seven per cent cap in September 2014, it contributes almost 40 per cent of earnings before interest and tax. Smaller power firms and non-power users are the primary takers of e-auctioned coal as most of the electricity generation firms do not bid aggressively in view of tariff caps.
One of the reasons behind the coal ministry removing the cap seems to be the rising pit head stock of CIL. The company’s off-take for 2014-15 was lower than its output at 489 mt and the pit-head stock went up to 53 mt at the end of 2014-15, compared to 47 mt in the previous financial year, owing to evacuation issues.
