After announcing an interim dividend of Rs 18,300 crore under government direction which could potentially hit its capex plans, Coal India (CIL) now faces the prospect of lowering the sales of fuel under the lucrative e-auction platform, in what could adversely impact its revenues.
An inter-ministerial group looking into coal linkages to captive power projects is considering limiting the use of e-auction platform by CIL for coal produced over and above its annual production targets. The coal, thus, saved is proposed to meet the fuel needs in the power, cement and steel sectors.
If the proposal is accepted by the group, it would be a big setback for CIL as the company gets close to 20% of its revenue by selling coal under the electronic auction route.
The PSU sold about 47 million tonne of coal e-auction route and got price quote with a premium of over 65% over the notified price of coal. In better market conditions, the realisation has been over 85% as well.
?The IMG will consider the proposal that has been supported by the power ministry. Views of the coal ministry would be taken before CIL is told to make changes into e-auction framework,? said a government official privy to the development.
For the power ministry, however, reducing CIL’s e-auction pool has become important as it is saddled with requests from over 10,000 of captive power generation capacity (that are expected to be commissioned up to March 2015) who are without any form of coal linkage. It is estimated these units would need over 30 million tonne of coal annually and CIL is not in a position to meet this requirement unless it diverts some of its e-auction coal.
The government has already burdened CIL with a heavy load of dividend to mobilise resources essential to keep fiscal deficit under check. The company’s board at its meeting had declared a special dividend of R29 per share, highest declaration so far by any PSU.