The coal ministry has decided to slash the reserve price for coal offered via the e-auction channel so that inflationary pressures are eased, Union minister of state for coal Santosh Bagrodia said.
With effect from the next e-auction, the reserve price will be only 5% over the notified price — the government-controlled price at which Coal India Ltd sells coal — against a premium of 30% charged even last month and 82% in April.
CIL will also push more coal through the e-auction channel, Bagrodia said after a late night review meeting with the coal giants top brass on Wednesday.
Against 11.5million tonne sold via e-auction last month, CIL will push 15m tonne in June, with half already sold. Bagrodia said the 5% premium for e-auction will cover its administrative costs.
CIL had earlier decided to sell 3m tonne a month via e-auctions and forward e-auctions, with the goal of 36-38m tonne a year or roughly 10% of the total production in 2007-08.
CIL chairman Partha S. Bhattacharyya said that in April the reserve price was 82% above the notified price but subsequently it was brought down to 69%, 40%, 30% and now to 5%.
Last month, CIL offered 11.5m tonne to the e-auction but the offtake was only 5.3m tonne. ?To encourage more offtake, we are reducing premiums but it is very difficult to predict the market movements,? Bhattacharyya said.
?One reason we could think of is may be the premium is perceived to be high. So we reduced the premium and brought it down virtually to the level of floor price but at this price there are chances that consumers take the coal and keep it in stock,? he said.
However, Bagrodia said the government?s intention is to keep prices down.
?Our intention is that the price should go down. For this we are flooding the market with coal so that no one has to pay a premium,? he said.
Market observers feel that supply right now is much more than the demand, leading to poor offtake. In fact, pushing 3m tonne per month via the e- auction platform would have been ideal and in that volume CIL could command a premium.
With global crude oil prices shooting up, many countries are renewing their focus on coal as an alternative energy source. Bagrodia said offtake is low because the power plants are trying to save on inventory costs and keeping stocks at almost critical levels of below the mandatory 21 days.
Citing the Kahalgaon and Farakka super thermal plants of NTPC Ltd, Bagrodia said both are in a critical stock situation but they are not building up stocks to 21 days. This has forced Eastern Coalfields Ltd, a CIL subsidiary that supplies prime coal to these two plants, to cut production.