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Cement-makers see hike in coal prices on e-auction directive

August 22: Prices of domestic coal sold through the e-auction route in India are likely to rise significantly as Coal India Limited (CIL), pursuant to a directive from the Ministry of Coal, is progressively reducing the offering quantity, officials from at least two cement-makers feel.

The ministry had directed CIL to bring down the e-auction quantity to 25 million tons in 2014-15 as against around 58 million tons allotted through the system in 2013-14, they said.

“The decision will certainly affect all the industries apart from power,” said an official at J K Lakshmi Cement Ltd.

“If CIL resorts to cut in the e-auction quantity, which it has already done from June onwards, there will be a situation wherein larger number of people will chase small quantities and this will impact prices of coal that is available under the e-auction system,” the official said.

In addition, the price of imported coal too may harden a bit as traders will take advantage of the situation even as coal prices in international markets rule soft, feels the official.

Corroborating this, an official from Ambuja Cements Limited said, “If the e-auction quantity is reduced, the rate of coal will be flying high.”

“The quantity of coal that we get from coal linkages is fixed, but our requirement is more than that. The price at which we get coal from e-auction is comparatively lesser than that of the market price from the traders,” the Ambuja Cements official added.

Currently, Ambuja Cements procures 60,000-62,000 tons of coal per month, but the official did not elaborate whether this includes imported coal.

According to the officials, at present, e-auction prices are lower compared to international prices.

“International coal prices are somewhat favourable to the market,” said the official from J K Lakshmi Cement.

“Currently, coal prices through e-auctions are slightly lower than international prices. But, if the allocated quantity is reduced through e-auctions, then e-auction prices will also go up and will be at par with imported coal,” he said.

He further clarified that because of the reduced the e-auction quantum, profitability of Coal India Limited is likely to be hampered as well.

“With this, most of the coal will go to the state-run power plants and they do not pay money to CIL in a time-bound manner. The e-auction directive will narrow CIL’s bottomline as the profit it used to make out of this will be curbed. Ultimately CIL is going to suffer because of this decision,” he said.