The Hindu Business Line : Govt fixes floor price for e-auction of coal

The Ministry of Coal has decided that the floor price for e-auctioning of coal should be fixed at 20 per cent above the Coal India Ltd's (CIL) notified price. This price would be applicable from the next round of auction.

The move follows a series of complaints and representations from small-scale industry associations and other non-core coal consumers that the e-auctioning is leading to unreasonable prices, which is making their business economically unviable.

CIL initiated e-auction of coal on an experimental basis last year for non-core users with the dual objective of weeding out coal mafia through a transparent bidding process as well as to figure what would be the market determined prices for various grades of coal. After putting the systems in place, the company is going in full swing from this year with the new system.

Ministry sources told Business Line that though the system was working well, the floor price fixation was grossly incorrect.

"CIL started with a low floor price which was the notified price. But after a few auctions, they started using the weighted average of the last few auctions as the floor price. As a result, the floor price for each successive auction was moving higher and higher leading to distortion of prices. There are cases when Mahanadi Coalfields Ltd (MCL) had sold coal at a premium of around 300 per cent. As a result, there were floods of complaints," officials said.

The Ministry observed that the very purpose of e-auction was getting defeated in the process and so reviewed the whole thing and decided to go in for a fixed floor price mechanism.

Meanwhile, the Prime Minister too had intervened to increase the coal availability to non-core sectors and has instructed that initially 10 million tonnes of coal be earmarked for e-auction for the current year.

This is over and above the 18 million tonnes of coal supplied to the small-scale sector through linkages. This additional amount is for new units as new linkages cannot be given as the matter is pending in the Calcutta High Court.

Officials said that the Indian Institute of Management (Kolkata) has been given the responsibility to constantly monitor the e-auction process and after this 10 million tonnes is over whether additional amounts would be released for e-auction will depend on the IIM(K)'s review report, officials said.

Also, an additional three million tonnes of coal has been earmarked for the State small-scale cooperatives and another two million tonnes for the National Cooperative Consumer Federation (NCCF) for downline distribution to the small-scale units.

Ministry sources said "though we want better price realisation for CIL, we don't want to look like a bania. Though in due course CIL should move towards market-determined prices, it should not appear that the Government is exploiting a monopoly situation. So such restrictions were necessary."

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