The Hindu Business Line : 10% of CIL’s output to be sold through e-auctions

New Delhi, Oct 19 The new Coal Distribution Policy, which has been approved by the Government, will see the re-introduction of e-auctions with certain modifications. As per the new policy, Coal India Ltd (CIL) will earmark around 10 per cent of the estimated annual production to be sold through this route.

“This year the targeted production target of CIL is around 384 million tonnes, so we expect around 38.4 mt to be sold through e-auctions. We expect this system to be introduced within one month and until such time the present scheme of sale of coal under e-booking will continue,” a Coal Ministry official said.

Modifications

Under the new policy there would be no floor price for bidding under the e-auction scheme as was the case in the last phase of e-auction. The e-auctioning system was discontinued in December last year after the Supreme Court raised questions on its transparency as there were different reserve prices for different sectors.

“The other modification in the policy is that public-sector undertakings of coal will have the liberty of having a reserve price which is not lower that the notified prices. Also under the new mode of e-auction there will be two platforms — one for the supply of coal for a longer period of one year or more and the other for supply of coal for shorter periods as per the frequency of offer of e-auction,” the official said.

CAP increased

Also the existing cap of 500 tonnes per year has been increased to 4,200 tonnes per year with respect to small and medium sector consumers in the new policy.

“Since CIL and its subsidiaries cannot deal with a large number of small and medium sector consumers, the State Governments will be required to take up responsibility of identifying such consumers and arrange the supply to them through their designated agencies,” the official said.

As per the policy, the State Governments have to put in place the necessary institutional mechanisms for supply of coal to these consumers within six months and the designated agencies will be entitled to charge actual freight and five per cent as service charge over and above the basic price charged by the coal company.

Letter of assurance

Another new feature of the policy is that a letter of assurance (LoA) will be granted by the coal companies to the project developers as against the present system of granting coal linkages. The policy states that all the existing linked consumers have enter into FSAs with the respective coal companies within six months failing which coal supplies can be discontinued.

The LOAs will be converted in FSAs after specific milestones are achieved by the project promotes in a period of two years in case of power projects and one year in case of other consumers.

“Consumers granted LoAs have to furnish a bank guarantee equivalent to five per cent of their annual requirement of coal which will be forfeited if the suggested milestones are not achieved within the stipulated period. Also under the new policy, CIL will have the liberty to import coal to meet their supply commitments to various consumers and in such case necessary price adjustments will be made by the coal companies,” the official said.

Classification

The system of classification of coal consumers into core and non-core has been dispensed with. “Since power and fertiliser sectors operate in a price regulatory regime, 100 per cent of their requirement will be made available at CIL notified prices but only under FSAs. With respect to defence sector and railways, their total requirement will continue to be met which is a very small requirement,” the official said.

For all other the consumers with coal requirement of more than 4,200 tonnes per annum 75 per cent of their requirement will be met at CIL notified prices.

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