Govt releases price index for commercial coal mining

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Published: June 6, 2020 1:00 AM

The rates have been derived from a weighted combination of monthly prices of coal in various channels of transaction, including imports, for the month of March.

Companies will use these prices to evaluate their bids for coal blocks in auctions, which are expected to take place next week.Companies will use these prices to evaluate their bids for coal blocks in auctions, which are expected to take place next week.

The government on Friday released the indicative coal prices for the maiden tranche of commercial auctions under the revenue sharing model. ‘Representative prices’ will be used to compute the government’s revenue share from auctioned mines.

The rates have been derived from a weighted combination of monthly prices of coal in various channels of transaction, including imports, for the month of March. Companies will use these prices to evaluate their bids for coal blocks in auctions, which are expected to take place next week.

The representative prices of non-coking coal between the G7 and G14 grades are in the range of Rs 1,098/tonne to Rs 2,619/tonne. Though the prices are higher than the notified price of the fuel sold by Coal India, industry sources said the rates look balanced. “It remains to be seen if the government, to reflect market conditions, modulates the weightage of each factor going forward while determining these prices for the next tranches,” an industry veteran told FE on conditions of anonymity.

The coal ministry has also rolled out the ‘national coal index’, which is the weighted average of the change in coal rates based on FY18 price levels. This index, sources said, will be used to calculate the amount of performance security companies need to pay after winning coal blocks, and will also have a bearing on prices of coal to be sold from these mines.

The Cabinet recently approved the new bidding methodology for commercial coal blocks according to which the floor price bench-marked for auctions would be 4% of the revenue share, incrementing in multiples of 0.5%. If bidders raise the government’s revenue share to more than 10% in auctions, bids would be accepted in multiples of 0.25% of the revenue share thereafter.

According to the Atmanirbhar Bharat package, not only fully explored coal blocks, but also partially explored ones will now be auctioned for commercial mining, and 50 assets will go under the hammer soon.

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