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Coal linkage auction:Initial floor price to be at CIL ROM rate

Taking ahead the process of coal linkages auction, the government today said initial floor price will at the relevant state-owned CIL ROM price and bidders will bid for premium above this price for the relevant grade and for a particular 'link quantity'.

The coal delivered from the mine that reports to the coal preparation plant is called Run of Mine (ROM).

Stating about the broad guidelines for methodology for auction of coal linkages to non-regulated sector, including steel and cement, the ministry said in letter dated February 15 to both CIL and SCCL that if bids are received for quantity greater than 'link quantity' offered, then the premium is increased in steps.

"Auction stops when bids are received for exact quantity i.E. 'link quantity' offered. Each successful bidder pays the same price," it added.

The ROM price to be paid will be suitably indexed by CIL/SCCL for subsequent years. The successful bid premium shall remain constant over the contract period.

Maximum bid quantity by a particular bidder shall not exceed the normative requirement of the End Use Plant, the ministry said, adding that for auction of linkages, Coal India (CIL)/Singareni Collieries Company Limited (SCCL) shall chalk out annual or six-monthly auction calendar.

"There shall be provision for Third Party Sampling of coal supplied," it said.

In a bid to ensure coal supplies and a level playing field to non-regulated sectors such as steel and cement, the government had earlier this month said that coal linkages will be provided to them only through auctions, which will kick off later this month.

Government is planning to auction coal linkages of around 24 million tonnes in the first year.

"The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has given its approval that all allocations of linkages...For non-regulated sector...Shall henceforth be auction based," an official statement had earlier said.

source: http://www.business-standard.com