State-run miner Coal India Ltd. (CIL) had received an overwhelming response for coal sales via auctions with the introduction of the single window policy in Mar’22, generating higher revenue in the process.
However, the joy was short-lived due to the prevailing strong demand from the power sector, as the company had to significantly reduce its offerings during Apr’22.
What is single window scheme?
The provision was initiated by merging various sector-specific auctions on to a common platform. This also means no separate auction would be held henceforth for power and non-power sectors.
Ultimately, the spot scheme, which was already in place catering to the gamut of coal consumers, including traders, became the preferred choice for sale under the single window.
Sales under single window began on a strong note as entire volume was booked at a premium of 290% over the notified price during Mar’22, as buyers were in a rush to procure coal in a competitive market. The premium was recorded at a mere 14% for the series of auctions held in Apr’21.
No relief for non-power sector
In lieu of the elevated demand, there have been few auctions recently, with Bharat Coking Coal (BCCL) and Eastern Coalfields (ECL) being the only subsidiaries showing interest. These two have together offered a nominal volume of 0.28 mnt coal on sale till 18 Apr’22.
In sharp contrast, the offered volume was 6.89 mnt in the similar time-frame in Mar’22 with the all the subsidiaries participating in auctions.
Coal offered under spot auction in Apr’22
Source: CoalMint | Quantity in t
On its part, the company has offered a bulk 6.68 mnt of coal for power customers under the ‘SHAKTI’ policy, which is currently undergoing. These auctions are of a special nature being conducted on a quarterly basis and provide short-term linkage for a minimum of one year.
But there was no relief to the non-power sector with the curtailment in place for the regular spot auctions.
Lower inventories keep supply tight
With the onset of summer, coal inventory at plants has started to decline. As on 13 April, the stock level was assessed at 23.17 mnt as against 25 mnt seen over the past three months.
Notwithstanding the demand, these plants have been put in a hand-to-mouth situation by supplying coal at an average of 2.13 mnt/day during 1-13 April, which is lower than the consumption rate of 2.29 mnt/day.
Moreover, challenges with regard to logistics constraints implies there is a limit in raising the coal supply which calls for substantial development in the existing infrastructure.
In this situation, if the auction sales are increased, this would further affect supplies to the power sector and put the domestic market at risk of a fresh round of coal shortages similar to previous year’s.
In the short-term, lower offerings in auctions are expected to continue until adequate stock levels are maintained before the onset of monsoon, as coal supply gets affected during the rainy season.
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