LtdCoal India’s (CIL’s) first tranche of linkage auction for the non regulated sponge iron sector posted a booking of 2.05 million tonne against the offer of 3.78 million tonne. The booking has been done for a contract period of 5 years, which can be extended to 10 years with mutual agreement between supplier and the taker.
A coal ministry official on the condition of anonymity said the first tranche of auction was a low key affair since booking was much lower than that was offered. Sponge iron plants across at present draw around 8 mt per annum from CIL. While the offer was less than 50% than that of the general demand, booking was even lower. Besides CIL could get only 1% premium on the floor price of coal per tonne.
Although the average auction price per tonne is yet to be worked out coal price across grades for non regulated sector is 120% of the notified price of coal for the regulated sector. Different grades of coal have different prices and the linkage quantity was more or less booked at the floor price per tonne. However, average price realization could be between Rs 1,300 and Rs 1,400 per tonne, a CIL official said.
CIL chairman and managing director Sutirtha Bhattacharya told fe that the booking for sponge iron seems to be low because much of the sponge iron units’ fate depended on the availability of iron ore. So without ensuring supplies of iron ore aggressively bidding for coal wouldn’t have been wise thing to do on the part of sponge iron plant owners. “Anticipating that the demand would be low, the auction for sponge iron unit was kept first and with a conservative offer”, Bhattacharya said adding that high demand was expected in linkage auction for captive power, cement and fertilizer.
A total of 23.75 mt of coal has been put on the block for FY 17 for auctioning of linkage to all consumers belonging to the non regulated sector, of which only 3.78 mt was offered exclusively for sponge iron. Booking for sponge iron was 55% of the quantity offered. The next linkage auction would be for the cement sector where an offer of 2.15 mt would be made, an official said.
Non-regulated sector consumers’ account for approximately 25% of CIL’s entire off-take and this include captive power plants, cement plants, sponge-iron plants, fertilizer, chemical and many other industrial units. The move would benefit consumers of this sector not having linkages or whose Fuel Supply Agreements (FSAs) are expiring or got expired. Consumers of this segment would also get the opportunity of choosing specific grade of coal, preferred source of supply and preferred mode of transportation.
Non-regulated consumers would also be able to book 100% of their normative requirement through the bidding process instead of the earlier practice of around 75% of their normative requirement. The bidders, taking into consideration their techno-economic requirements, would also have the option of selecting the grade of coal, secure their coal requirement from the nearest mine of their choice, as well as the mode of transport in a bid to save their logistics cost. Quality of all supplies would be assured through third party sampling which so far has only been the privilege of power utilities or consumers having their annual contracted quantity of 4 lakh tonnes and more.
According to the terms of contract the linkage would be converted into FSA. While there would be no premature termination of existing FSAs, there would be no renewal of FSAs that got expired in FY 16, a CIL spokesperson said.