The move is aimed for better price discovery for coal in the domestic sector where more than 80% of the sales are still done under the administered route. The price realisation through this route till now has been 60% higher than the administered prices.
Out of the countrys total coal production of about 400 mt, price of about 300 mt is administered by the government. It is proposed that one of the deciding factors for fixing the administered prices of coal will be the e-auction price.
In order to re-work the present pricing mechanism, since the system of notifying prices tends to suppress the price, leading to black marketing, it has also been decided that the seven coal subsidiaries under Coal India will be given the freedom to reduce the gap between the administered price and the market price of coal. This will enhance the revenue of the CIL companies.
While the power sector has been kept out of e-auction route and will continue to get this input material at administered prices, the CoS has said that even administered pricing should be determined taking into account the price of imported coal and market price of e-auction.
Under the new mechanism, administered price of coal (for the power sector) will be determined on the basis of imported price of coal received by southern coastal power plants and market price of e-auction subject to the plus/minus 20% band with respect to the administered price as the benchmark.
For 2005, the government intends to increase the total production of 406.48 mt. Out of this, coal linkages of about 279 mt has been provided to the power sector.