Coal India Ltd is expecting to sell close to 80-90 million tonne (mt) of coal through e-auction platform this year at an average premium of around 300 per cent over the notified price backed by higher demand and surge in international coal prices. While in volume terms, it may be marginally lower than the total sales through e-auction registered last year, the realisations are expected to be much higher due to the huge premium over notified price.
The state-owned miner has been earning close to ₹4,400-4,500 a tonne on sale through e-auction route this year as compared to the average realisation of around ₹1,400-1,500 a tonne through FSA (fuel supply agreement) route. It had earned a premium of around 30 per cent over the notified price (or close to ₹1,570 a tonne) same period last year.
It is to be noted that a higher sale through auction route would help the company garner better profitability as the average price realisation on e-auction is usually better than the sale through FSA route.
According to Pramod Agarwal, Chairman and Managing Director, CIL, sale through e-auction route might get curtailed if the demand of power increases substantially. However, as production starts picking up in the coming months and the anticipated drop in demand from power sector moving forward would help push up e-auction volumes.
“E-auction price in the first quarter was around ₹4,340 and we sold close to 20 million tonnes. I don’t have a figure right now, what is the quantity we have auctioned in Q2, but I presume that this trend of about 20 to 25 million tonnes will continue throughout the year and we will end the year with about 80 million to 90 million tonnes of e-auction coal. But this depends how the demand for the power comes up. If the demand of the power increases substantially, then our ability to do the e-auction reduces to that extent. Price as of now is still very high, and in certain cases, we are getting about 4,500 or even 300 per cent of premium. So, about this range will be maintained if it does not increase further. But at least this range will be maintained for e-auction price as well,” Agarwal said in the latest analyst transcript.
Demand from power sector to moderate
CIL is allowed to auction up to 20 per cent of its coal production through e-auction and it typically sells close to 16-18 per cent of the volume as it has to give priority to the power sector. Whenever demand from power sector goes up, its sale through e-auction platform reduces.
However, Agarwal was hopeful that the e-auction volume will increase in coming months with the demand of the energy sector going down as has been the trend usually. The demand for power goes down in October, November and December months and with that, requirement of coal also goes down. The average stock at power houses has also improved to close to 28-29 mt as compared to same period last year when it was around 10-12 mt.
“This extra 16 mt will give them a lot of leverage and this will help us in giving coal to non-power sector also and this is not likely for next few days, perhaps the stock may go down. But after that, in October onwards or after 20th of September, the stocks of the power houses are unlikely to go down. That’s whatever the trend we have seen, but nobody can say or confirm because it depends a lot on the monsoon condition and the temperature also. So, that is the situation. So, e- auction volume should increase in the coming months,” he said.