The Hindu Business Line : Coal India plans forward e-auction in Feb

Kolkata, Dec. 15 After re-introduction of e-auction, Coal India Ltd is now on its way to introduce one-year forward e-auction of coal through the same platform.

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 users of coal. The new instrument may be introduced as soon as in February 2008.

To benefit SMEs

“The e-auction has been a major draw to the small and medium sector (SME) which does not enjoy the linkage. To help these user groups to plan their procurement on a long-term basis, we are now planning to conduct forward auctions,” a CIL source said.

In sharp contrast to futures trading, the forward e-auction will pave way for a contractual obligation between both the buyer and seller for a period of one year divided into 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 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,” the official added.

He, however, did not rule out the possibility of launching a full fledged futures contract on coal in the long term.

High realisation

Meanwhile, CIL has realised 100 per cent over and above the notified price of coal through e-auction during the last two weeks. E-auction was re-introduced on November 26. “Considering that e-auction has resumed after almost a year, over enthusiasm on the part of the buyers might have pushed bid to such high. We are expecting the prices to stabilise during the next few weeks,” the official added.

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Coal India plans forward e-auction in Feb