State-run miner, Coal India Ltd (CIL), has developed a new scheme for conducting coal sales under the auction route by the introduction of a two-stage bidding process.
The first stage, similar to the existing model, would be carried out to determine the successful bidder, price and the allocated quantity. The objective of the second stage is to affix mode-wise coal allocation through a system driven algorithm.
The new auction policy has been termed as ‘CIL auction scheme 2022’. This would continue to serve as a single window for coal sales catering to the entire gamut of coal consumers, as per Ministry of Coal guidelines.
However, a few alterations have been made in the auction set up to facilitate better allocation by making efficient use of logistical infrastructure.
Offer structure
Instead of coal offerings from individual mines/collieries, the coal companies would now float quantity for auction as a cluster of dispatch points.
The cluster comprises a set of railway and road loading points from where the coal from the mines will be delivered, with capacity of each loading point indicated separately.
The auction would be based on a mode agnostic system, with the representative grade of the individual cluster being the lowest grade among the loading points. Accordingly, the reserve price will be fixed over and above the notified price applicable for the non-power sector.
First stage
The buyers are required to place bids against each cluster by quoting a price equal to or above the reserve price.
Coal allotment will be made in accordance with the highest bid. The process would continue until the entire offered quantity is exhausted.
Post bidding, seniority would be decided on merit order of bid prices.
* In case of two or more bidders quoting the same highest price, preference would be given to the one who placed bid for the higher quantity.
* In case of two or more bidders quoting same highest price and quantity, preference would be given to the one who placed the bid first.
Second stage
After completion of the first stage, the successful bidder would be provided a window of six hours to decide upon the choice of mode along with order of preference for the desired loading point.
The bidder opting for rail mode must ensure that the quantity is in multiple of rake fit (around 4,000 t); otherwise the excess volume would be fortified. Similarly, it is mandatory for the bidder having bid quantity less than 4,000 t to register road as preferred mode so as to avoid risk of booking being cancelled.
Finally, the allocation of mode and loading point would be based on choice made by the highest-ranked bidders.
However, the allocation of individual loading points will be to the extent of evacuation capacity indicated in the offer. After this process, if some quantity remains unallocated, the equivalent bid security would be refunded to the concerned bidder.
Post auction
CIL will compute bid premium over the notified price in terms of percentage for individual clusters.
In case, grade of loading point differs from the representative grade of the cluster, the bid price for that loading point would be calculated by applying the bid premium.
Since the auction is held on representative grade which may include different grades from the loading points, the bidder would be bound to accept allocated coal as per merit list, which remains a major disadvantage on the part of the bidder.
CIL has informed that it will be organising customer awareness meetings to highlight modalities and the key features of the scheme.
On the performance front, the miner has been struggling to provide adequate coal via auctions amid strong demand from the power sector. During April-August 2022, coal bookings in auctions dropped 69% y-o-y to 16.63 mnt.
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