Cabinet Decisions: Open market for coal gets a leg up

Cabinet Decisions: Open market for coal gets a leg up

In a move will boost the fledgling open market for coal, all producers including state-owned Coal India will now sell the dry fuel through a common e-auction window, rather than via sector- specific auctions. While existing coal linkages won’t be disturbed, the CCEA decision would help correct market distortions as all users, including thermal power producers, steel and cement companies, will be treated at par under the e-auction window, and offered coal at the same rate.

The common e-auction window will increase operational efficiencies and lead to an increase in domestic coal demand, the coal ministry said in a statement. Coal producers will no longer have the discretion to allocate coal to different end- use sectors and be encouraged to set up coal gasification plants.

The move is in sync with a trend of more players entering commercial coal production after the government, in October last year, allowed captive coal producers to sell up to 50% coal produced from captive mines in the open market, after meeting the requirement of end-use plant linked with the respective mines.

With demand for coal rising, and import of the fuel threatening to strain the current account, the government has taken a series of steps in recent years to populate the sector with more investors and technology-intensive players. Also, coal assets are now being auctioned off for commercial mining, with no end-use restrictions, through the new market-determined revenue share model that replaced the fixed fee/tonne regime that had earlier turned off private investors.

“The (common e-auction window) will be subject to CIL/SCCL meeting the coal linkage requirements against existing linkages and do not impact the current linkages to power and non-power consumers at contracted prices,” the government said. “Coal offered through the single e-auction window shall be transport mode agnostic with default option being through rail mode,” the ministry added.

However, coal may be lifted by the consumers through the road mode/other modes depending upon their choice and suitability without paying any additional charges or discount to the coal companies.

Long-term allotment of coal by CIL/SCCL, without affecting the supplies against existing coal linkages, to their own gasification plants will be allowed at prices as may be decided by the coal company.

However, the taxes, duties, royalty etc shall be paid by the coal companies on the notified prices of coal for power sector.

Check the source here –Source, Financial Express.