Unregulated sectors: Coal Ministry not to renew supply pacts that end this fiscal

Slowly but steadily the Centre is moving towards making coal purchase a transparent procedure, as all other sectors, except fertiliser, have to buy through a bidding system. The Centre will not renew fuel supply agreements of the unregulated sectors of steel, cement, aluminium, and captive power plants, among others, that are ending this fiscal.

Around 10 million tonnes of fuel supply agreements are expiring in 2015-16.

“We want to make the sourcing system transparent. This we want to do by asking the buyers to source fuel through the auction route. To begin with, we have decided not to renew the fuel supply agreements for the unregulated sectors that are ending this fiscal. However, we are not terminating any agreements prematurely,” Coal Secretary Anil Swarup told BusinessLine .

The Cabinet, on February 3, had agreed to give fresh coal linkages to the unregulated sectors only through auctions.

In the coal linkage auctions, the Ministry will also put 14 million tonnes of the fuel from incremental production of Coal India during 2015-16. During the fiscal, Coal India is expected to produce 550 million tonnes of coal or 56 million tonnes more than 2014-15.

Incremental output Explaining incremental output, Swarup said, every year 25 per cent of additional output of Coal India over the previous year’s production will also be added to the coal linkage auction pool. Therefore, the total quantity to be auctioned for unregulated sectors will be 24 million tonnes (10 million tonnes of expired FSAs and 14 million tonnes of incremental production).

He further added that in 2016-17, Coal India is expected to produce 600 million tonnes, an increase of 50 million tonnes from the current year.

Therefore, of the total production, more than 150 million tonnes will go to unregulated sector (25 per cent of 600 million tonnes).

For the power sector also the government has started work on similar lines, but with a focus on efficiency as has been done for natural gas.

On the recently concluded auctions of coal mines, Swarup said, of the 28 coal mines that have been auctioned in three rounds so far, 10 have started production and around 7 million tonnes of coal has already been mined.

“The upfront amount collected through auctions has already been transferred to the States while the monthly royalty and mining amount is being sent directly to the state governments,” he pointed out.

Having increased the availability of coal, Swarup said that the focus is now on quality. “From January 1, 100 per cent of coal crushing is happening. This takes care of the quality as after crushing, the stones are easily taken out. Also, third party coal sampling has started according to the new guidelines,” he said.

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