Experts say such a phenomenal increase in auction premiums is the result of coal shortage created due to various government actionsNew Delhi: Coal prices in the past year have shot up by about one-and-a-half times, almost twice as much as the increase in international rates. And one of the reasons that have contributed to the rise is reduced e-auction offerings by Coal India Ltd (CIL).
CIL offered 19% less coal in Q2 than last year
Between April and September this year, Coal India offered 37 million tonnes of coal through its e-auction platform, 19 per cent less than that in the year-ago period. This increased its average realisation 50 per cent to Rs 2,491 per tonne during the period.
Q2 e-auction sale figures higher than 2017
Despite offering less coal, the company registered 21 percent increase in its income from e-auctions at Rs 9,240 crore this year as compared to Rs 7,652 crore in the year-ago period, as prices rose because of lower availability.
For the second quarter of the current fiscal, Coal India’s average realisation from each tonne of coal sold through e-auctions increased 52.47 per cent to Rs 2,682 per tonne. Its income from the platform increased almost 39 per cent to Rs 4,583 crore as it offered nearly 9 per cent less coal at 17.09 million tonnes.
What do experts say?
Experts believe that among the factors that have caused coal prices to rise are increased demand by the power sector and the non-availability of coal for non-power companies, including captive power plants.
Rajiv Agrawal, secretary of Indian Captive Power Producers Association said: “Such a phenomenal increase in auction premiums is the result of coal shortage created due to various government actions, including stoppage of imports for blending by public sector generators and diversion of rakes from private sector coal consumers to government generators.”
Ashok Khurana, director general of Association of Power Producers said: “With increased power demand quantum of coal under e-auction should have been increased. However, it is surprising to note that the quantum shows a decline, leading to a 50 per cent increase in prices and thus impacting the price of power for consumers.”
“Rising import dependence, increased seaborne thermal coal prices, a sharp rupee depreciation and rising spot e-auction coal prices are estimated to have led to a 20-34 per cent rise in coal costs between April and October for a player, depending entirely on mix of e-auction and imported coal,” said Jayanta Roy, senior vice-president at ICRA.
PSU Watch is a business news brand of 27 Frames Communications LLP. It places the spotlight on PSUs, Governance, Bureaucracy, Defence and Public Policy as the sector traverses through a period of radical change.