Coal news and updates

Sharp rise in coal prices in e-auctions

September 3: Prices of coal sold through the e-auction route in India have risen sharply during the past three months (between June and August) as miners have reduced the offered quantity following a government directive, according to a compilation by ICMW.

According to the compilation, the average bidding price in the e-auctions in May was 57% above the notified price (NP), which rose to 73% over the NP in June and further to 74% above the NP in July.

The average bidding price in the August auction on the coaljunction platform was 84% above the NP.

Based on feedback received from consumers, ICMW understand that the primary reason for the spurt in the bidding price is the sharp reduction in the offered quantity.

According to information available with ICMW, the offered quantity fell to 1.76 million tons each in July and August following a directive from the government to reduce the total e-auction quantity to 25 million tons during the current financial year.

The offered quantity in June was 4.18 million tons, 5.41 million tons in May and 5.85 million ton in April.

The average bidding price in the e-auction between April and July, 2014 was 62% over the notified price as compared to 41% over the notified price during the corresponding period of 2013.

“Because of the government directive, which prompted coal miners to cut offering through e-auction, it was found that too many consumers were chasing too less coal in July and August, which led to a spurt in the bidding price as many consumers depend on e-auction for their coal requirements because they do not have linkages,” an expert added.

ICMW had reported recently that the bidding price in the e-auctions would surge due to a reduction in the quantity offered under the route.

“Because these non-linked consumers generally procure smaller quantities of coal, they get delivery of coal by trucks, which is generally not preferred by power sector consumers who depend on supplies by railways. So, in a way, reduction in the offered quantity through e-auction has not benefitted power sector consumers in an effective way,” the expert said.

CIL and SCCL, the two leading government-owned miners, which sell coal through the e-auction route, generally offer coal from the mines, which do not have railway siding and supplies are routed through trucks. Because of this, power sector consumers, who need coal in bulk, do not generally buy coal through e-auction, an official from CIL told ICMW.

Generally, it has been found that less than 10% of the total quantity offered in the e-auctions go to power sector consumers as only around that much of coal is offered for delivery by railways.

The balance 90%, which is available for delivery by truck (road), is either purchased directly by consumers in industries such as cement, sponge iron, brick kilns, paper etc or through traders, who take responsibility for delivering the material at consumption points.