Indian Government to consider Domestic Coal Prices as Benchmark

Indian government is planning to consider current domestic coal prices as a benchmark to calculate the NPV of 74 cancelled coal blocks.

Post cancellation of coal blocks, the government has decided to auction 74 coal blocks to resolve the problem of raw material scarcity in the country. To evaluate Net Present Value (NPV) and future earning of these blocks, the government is likely to consider the current domestic coal pricing (CIL’s price) model as a benchmark. However, the proposal is currently seeking for approval.

Companies, which are planning to participate in the competitive bidding, are expected to get some relief as state-run monopoly CIL’s prices are comparatively lower than the international coal prices. Domestic e-auction prices would not be considered for valuation as the auction prices are getting up after the reduction in e-auction quantity at the same time imported price is around 25% cheaper than domestic auction prices.

“Usually, Coal India sells the material to non-power sector at higher price and also sells a portion through an electronic bidding system, which is at least 15-20% higher,” said an official close to the development. 

The government will auction all blocks on the basis of highest amount,  a bidder is ready to pay for every tonne of coal produced and at the same time, they have to pay 10% in advance of the total NPV to the government and rest can be paid on the basis of block capacity.