The Hindu Business Line : Coal India to introduce forward e-auction next month

To regulate supply
Spot and forward auctions together are expected to sell 40 mt in 2008-09’
There will be a contractual obligation between the buyer and the seller

Pratim Ranjan Bose

Kolkata, Feb. 17 Coal India Ltd will introduce forward e-auction of coal in March. The new instrument will be launched on the existing spot e-auction platform and is expected to help the users especially the small and medium enterprises (SME) to plan their procurement on a long-term basis.

“The forward e-auction will be introduced in March. The spot and forward auctions together are expected to sell 40 million tonnes of coal in 2008-09,” Mr K. Ranganathan, Director of CIL, told Business Line. The company produced approximately 361 million tonnes of raw coal in 2006-07.

Unlike futures trading where physical market players as well as speculators, investors and hedgers can participate in the bidding process, the participation right to CIL’s forward auction is reserved to the producer and the users of coal.

There will be a contractual obligation between the buyer and the seller for one year divided in four quarters. The buyer will be allowed to bid different prices and quantities for different quarters and will be lifting his requirement on monthly basis based on 15 days advance payment.

Eligibility criteria

Just like the e-auction, price offered, quantity to be lifted and timing of placing the bid will be considered as eligibility criteria for successful bids.

“Through the forward auction we are actually looking forward to discipline the supply of coal to a large number of coal users especially the small and medium users. Accordingly, the contract is more obligatory in nature and the contracted price will have no relevance to the spot e-auction price,” a CIL official added.

Meanwhile, CIL’s spot e-auction auction is witnessed increasing interest from users. “We are currently selling 2.5–2.8 million tonnes of coal a month through spot auction,” Mr Ranganathan said. The auction was re-introduced in November.

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