NEW DELHI: Coal India won’t discontinue the lucrative business of e-auctioning of the fuel in order to be able to comply with the presidential directive to sign fuel supply agreements (FSAs) with power companies to meet 80% of the latter’s needs.
Despite a suggestion made by the power ministry to the contrary, the coal ministry has taken the view that the PSU will continue with e-auction and sell 45 million tonne (mt) of coal annually through this route.
“There would not be any diversion of e-auction coal (to meet power companies’ demand). We are going to allocate 15-16 new projects to CIL soon, which would push up their production. There is no reason why the cap of 10% (of the total output) on e-auction of coal should be reduced,” a coal ministry official said.
Earlier, the minister of state for coal Pratik Prakashbapu Patil had said that CIL might have to divert a certain portion of coal from e-auction to meet the fuel supply commitments to the power companies. Even the coal minister Sriprakash Jaiswal has said that import and diversion of coal from e-auction were a few options that the coal major might look at. However, after the review meeting with CIL officials, the ministry has advised CIL to avoid both options, sources said.
A CIL official said although there could be fall of one or two percentage points in the coal available for e-auction, the quantity would not change significantly as the output is expected to increase. The target is to produce 464 mt of coal during 2012-13 as against 447 mt in 2011-12.
At present, CIL sells about 10% of its total production through e-auctioning route. Since the coal is e-auctioned on spot price, it sells at over 80% premium. For instance, while notified prices range between R500 and R2,500 per tonne, e-auction would fetch anywhere between R800 to R4,500 a tonne.
“The coal demand is expected to shoot up in the next two years. In that case, even if there is a slight diversion, the coal prices under e-auction would rather attract better premium,” N C Jha, former acting chairman of CIL said.