Economy

Industry body urges government to cap coal auction prices

Rishi Ranjan Kala | | Updated on: May 24, 2022
CCAI suggested that the premium of coal in spot e-auction be capped at a certain limit till normalcy in the supply resumes

CCAI suggested that the premium of coal in spot e-auction be capped at a certain limit till normalcy in the supply resumes | Photo Credit: AMIT DAVE

CCAI said that the average coal bid price in a recent spot e-auction rose by more than 800 per cent above the notified price

The Coal Consumers Association of India (CCAI) has urged Coal Minister Pralhad Joshi to cap spot auction prices as the average bid price of the key commodity at a recent spot e-auction rose by more than 800 per cent above the notified price.

The association pointed out that soaring bid prices for coal are leading to lower participation in auctions and non-regulated sector (NRS) industries including steel and cement have now resorted to drawing expensive power from exchanges while nearly idling their captive power plants (CPPs). This is increasing power demand as well as tariffs.

“As stated by many of our valued members, the average bid price of coal in a recently conducted spot e-auction by Mahanadi Coalfields rose as high as more than 800 per cent above the notified price. It is evident that some of MCL’s valuable customers were compelled to procure coal at such abysmally high premiums only for the sustenance of their respective plants, while many industries had to take the decision to be out of league in this auction due to soaring bid prices,” CCAI said in the letter, seen by BusinessLine.

While the allocated quantity as per the Fuel Supply Agreement (FSA) is not being supplied to the industries, coal miners are conducting spot e-auctions where the spot prices have scaled up to unprecedented high levels since March 2022, making it unviable for many NRS consumers to book their required quantity, it said.

CCAI’s suggestion

“Considering the severity of the situation, the kind intervention of your esteemed Ministry is earnestly requested so that all Coal India (CIL) subsidiaries may supply coal as per monthly scheduled quantity (MSQ) to NRS industry FSA consumers instead of limiting supply to the trigger level in order to mitigate the crisis,” CCAI urged Joshi.

The association suggested that the premium of coal in spot e-auction be capped at a certain limit till normalcy in the supply resumes in order to restrain the auction prices from going up uncontrollably in the high demand scenario. This could be on the lines of the Central Electricity Regulatory Commission (CERC) capping the exchange rate of power at ₹12 per unit.

“Under the ongoing coal supply crunch for the NRS, which has triggered imbalance and poor coal materialisation in the sub-sectors, it is requested that inter-plant transfer of coal within the same group company that has multiple plants with separate linkages could be considered. This may facilitate plants with extremely critical coal stocks to sustain themselves by obtaining some quantities from other plants with better coal stocks within the same group. ” CCAI said.

Otherwise, such exorbitant prices of coal would put unbearable financial burden on the Industries which would consequently increase the price of finished goods in the market affecting common people, it added.

The association has also requested an increase in the coal rake despatches to NRS industries, especially to the units located at considerable distances from mine pitheads, as they are especially in dire need of the fuel for survival.

Published on May 24, 2022
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