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Coal India (CIL) has begun the process of giving coal linkages to customers on the basis of a transparent auction -- similar to telecom spectrum auctions -- on 10 June, 2016. The first tranche of auctions came almost four months after the Cabinet cleared a decision to auction coal linkages for the non-regulated sectors of steel, cement and aluminium.
The auction process of the coal linkages is known as a ‘Non-Discriminatory Ascending Clock Auction Process’. Here, a specified amount of coal is on offer at a reserve price in the first round. If the demand is more than the supply, the price increases. This continues till demand is less than or equal to 100 percent of the supply, following which, CIL can select the price offer of the round which gives it maximum revenues. The bidders will then be allotted coal linkages.
For the current series of auctions for various sectors, a total of 23.75 million tpa of linkages are to be put on the block. This is the first time coal linkages are being e-auctioned.
Process Developments
CIL began the process of electronic auction of the coal linkages or fuel supply agreements, with the sponge iron sector eligible in the bidding, between 10 June, 2016 and 16 June, 2016. In all, 3.78 million tpa were offered, but bids were made for a much lower quantity. In the first four days, out of 2.92 million tpa that were on offer, only 1.64 million tpa were sold.
For the 4,80,000 tpa of coal on offer from the Belpahar OCP via road connectivity, companies paid a premium of Rs 25 per tonne over the reserve price of Rs 860 per tonne. For the 4,70,000 tpa from Junadih GPCK in Chhattisgarh, and the 1,80,000 tpa from KDH-I in Jharkhand, bids did not go above the reserve price.
Tata Sponge Iron has successfully bid for 24,000 tpa of Grade G4 coal from CIL at Rs 3,000 per tonne. The company is yet to receive the letter of allotment.
CIL will put on offer 2.15 million tpa of coal linkages for the cement sector from 28 June, 2016. Auctions for the cement sector were originally supposed to begin on 23 June, 2016. However, more time has been given to allow more bidders to participate. After the cement sector, coal linkages will be offered to captive power plants.
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