E-auction of coal may restart by Dec

NEW DELHI: A modified version of e-auction of coal is all set to make a re-entry into the market. The government is finalising a new e-auction format under which Coal India Limited (CIL) would finalise a reserve price for a coal block to be offered under the electronic route. This price would be made public only after bids are opened.

The changes would be part of Coal Distribution Policy that is waiting nod from the prime minister’s office (PMO). Once the policy is approved, government may permit CIL to restart e-auction of coal as early as late this year or early next year.

The e-auction has been suspended by the government since December last year following observations made by the Supreme Court. The apex court had said that process was not transparent and created disparity in pricing among different sets of consumers.

“We are evaluating various options to make the new e-auction of coal a more transparent process that helps in meeting the requirements of consumers. One suggestion is to replace the current system of having a floor price for coal offered under e-auction route with a mechanism where reserve price is finalised, but not disclosed to customers before the bid. It is expected that this system would prevent companies from making unrealistic bids,” a coal ministry source said.

The e-auction of coal has been a big success ever since its start in 2004. During 2005-06, CIL sold about 20 million tonnes of coal through the route, which generated additional revenue (over the notified price) of about Rs 920 crore. It also helped its subsidiary Bharat Coking Coal (BCCL) to turn around. The floor price under the route was fixed at 20% over the notified prices. The company was planning to sell about 32 million tonnes of coal during 2006-07, but this system was replaced by a e-booking mechanism following court orders.

The coal distribution policy is also likely to reclassify the definition of core and non-core sector status for the purpose of providing coal linkages. Accordingly, only power, fertilised and defence sectors would be classified as core sectors and would get 90% of coal through linkage at notified prices. Other sectors such as steel, cement, sponge-iron, aluminium, paper would be classified as non-core and may get only 75% of coal as linkage and the rest would have to be purchased through e-auction.

However, the coal allocation for small and tiny consumers would be increased from 5 mt to 8 mt and consumption limit of these customers would also be increased from the present 500 tonnes to 4,200 tonnes per customer.