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Coal India finds few takers for coal in special e-auction

The coal ministry’s special e-auction scheme for 2015 had few bidders as companies found that the floor price fixed was too high, much above the current global prices. While there were eight companies participating in the bid, the auction nearly failed to get any premium above the floor price.

The ministry, under a special e-auction scheme for power producers, offered 5 million tonne for sales. But MSTC could auction less than half the quantity that CIL offered, an MSTC official said.

For power plants having long-term and medium-term power purchase agreements (PPAs) the reserve price was set at  20% (of the CIL notified price) plusthe CIL notified price for the power sector. For power plants having short-term PPAs or no PPAs at all, the price was set at 40% plus the CIL notified price.

Subhasri Chaudhuri, secretary general of the Coal Consumers’ Association India (CCAI), the apex body of coal consumers across sectors, said although the consumers urged the coal ministry to withdraw the add-on pricing formula for fixing the reserve price of the auction scheme, the ministry went ahead with the scheme. MSTC sources said that it could sell only 2.4 mt on the auction held on September 30 and October 1.

While Dhariwal Infrastructure, Rattan India and Gupta Energy  were the only ones that lifted 51 rakes of equivalent coal at a 40% plus reserve price, Adani Power, DB Power, Jindal Power, WBPDCL and NTPC lifted 124 rakes of equivalent coal at a 20% plus reserve price.

While all the CIL subsidiaries offered their coal for e-auction sales, only coal from Mahanadi Coalfields and Northern Coalfields could be sold at 20% plus notified price from the MSTC platform.  In the case of 40% plus notified price, only Western Coalfields coal could be sold.

A CIL official on the condition of anonymity said G-13, G-11 and G-7 grades of coal were offered for e-auction sales at a floor price (CIL notified price +20% of notified price) of R732, R840 and R1,680 per tonne respectively on which the maximum premium commanded was R20 per tonne for G- 13 and G -7 grades of coal. The G- 8 grade of coal didn’t get any premium.  NTPC took G- 7 grade and lifted the highest quantity – 50 rakes at a less than 1% premium.

The coal with 40% plus notified price had to be sold at the floor price.

“This is the worst-ever premium that CIL ever got in an e-auction sale,” a CIL official said. However, the floor price for e-auction coal is generally the CIL-notified price, but the ministry preferred reserving the special e-auction floor price at a rate which in itself was a premium.

The special scheme was aimed at supplying coal to the power plants which were stressed or in short supply of coal even after receiving the fuel through fuel supply agreement, captive mines imports and normal e-auction.

Independent power plants, PSU power plants and state government-run power plants, which were commissioned and were being commissioned in 2015-16, were only eligible to participate in the scheme. Their procurement was limited to the extent of shortfall between its normative requirement and availability of coal from all sources.

Chaudhuri said since imported coal was already available at lower prices the special auction did not go well because of the huge floor price.  “Auction is a mechanism for price discovery but the very objective fails if the floor price is set with an added premium,” she added.

source: http://www.financialexpress.com