The Hindu Business Line : CIL e-auction may dip during May-July

Kolkata, May 12 Weak demand from brick makers may spoil Coal India’s plan to liquidate the huge 47-million-tonne pit-head inventory through increased e-auction offerings between May and July.

“The slack season has set in the coal sector. Demand for coal has come down drastically in May and is expected to drop further during the next two months,” confirms a CIL source.

He, however, maintained that following the Union Coal Ministry’s proposal, the company would offer 15 million tonnes of coal for sale through e-auction in May. The unsold quantities, if any, would be re-offered for sale in the following month with an aim to bringing down the auction prices from the current level, which is 60-65 per cent higher than the notified price.

The Ministry recently asked the company to offer a total of 40 mt of coal between May and July through e-auction as against the slated offering of 3 mt a month.

Elaborating the reasons behind the weak demand, sources said that brick-making industry — controlled by small un-organised players — which is one of the major drivers of the demand for coal in the dry season, had completed its seasonal procurement in April leading to an immediate drop in demand.

Operations come to a near standstill at the brick making industry during the peak rainy season between June and August.

According to sources, the sector procures a large quantity of coal through e-auction. However, considering its unorganized nature, such procurement is generally made through third party.

The brick making sector was considered as the single largest non-core consumer of coal in the erstwhile distribution policy. While the new coal distribution policy (NCDP – which is currently being implemented – does not make any such classification of consumers, the total demand of brick kilns is reportedly higher than the demand from major coal consumers like sponge iron and cement.

E-auction was resumed in November 2007. During November-March 2007-08 CIL sold 16 million tonne of coal through electronic bidding.

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