The Hindu Business Line : Coal merchants against CIL's e-auctioning system

THE Indian Coal Merchants' Association (ICMA) has questioned state-owned Coal India Ltd's (CIL's) decision to start selling coal to non-core sector industries through e-auctions, particularly when consumers in this sector do not have an alternative domestic source to procure coal at reasonable prices.

Reacting to CIL's decision to sell through e-auctions, to begin with about 10 million tonnes (mt) a year to non-core sector industries, the ICMA President, Mr V.K. Arora, said that the association is not against e-auctions , provided such an option is introduced in an era of plenty.

In his view, the e-auction system is "unthinkable" because CIL is a monopoly producer and the consumer has no alternative source to get his coal supplies at an appropriate price. Mr Arora said that e-auctions are an acceptable option in an era of plenty.

As per guidelines prepared for e-auctions, coal will be sold to the highest bidder (including traders) for any quantity. This means that the present system of the maximum permissible quantity and linkages would lose relevance. The e-auction system is bound to attract persons with deep pockets and a lot of muscle power to lift huge quantities, which would then be rationed to smaller consumers at higher prices. This, Mr Arora felt, would play havoc with units operating in the non-core sector.

He feared that financially weak coal-based units would be forced to shut down operations if they failed to lift the required quantities, thereby, rendering a large number of people unemployed.

Referring to the quality aspect of coal, he said that it is a well-known fact that the grade fixed by coal companies is invariably 1-2 grades higher than the actual grade. In the case of power and cement companies, the impact could be mitigated by joint-sampling.

But, for non-core sector industries the financial burden on account of inferior quality and grade slippage would entirely be passed on to consumers under the e-auction regime.

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Coal merchants against CIL's e-auctioning system