State-run miner, Coal India Ltd (CIL), has decided to resume the fifth tranche of auctions under the linkage scheme by initiating coal sales for the ‘other (coking)’ segment that was left among the non-power sector.
The company has informed coal offered on sale for this round would be intimated by this week, post which the final auctions would commence from 11 November, 2022.
Sales via linkage route are carried out annually through separate one-time auction for individual non-power sectors which warrant long-term fuel supply for a minimum of five years. These sectors comprise end-user industries viz. cement, sponge iron, captive power plants, steel, other (non-coking) and other (coking).
Nonetheless, post conclusion of previous four tranches of linkage auctions, the fifth tranche has been subjected to lengthy delays.
It may be recalled that CIL had initiated the fifth tranche back in 2019 wherein sales were concluded for sponge iron and the steel sub-sectors. However, due to Covid outbreak, auctions for the remaining sub-sectors were deferred indefinitely.
The company made a return to auction fray in September, 2021 when sales for cement, captive power and other (non-coking) were completed at one stretch up to January, 2022. Since then, there was no information regarding sales for the other (coking) sector.
Relief for non-power sector
The resumption of linkage auctions came as a big relief for the non-power sector at a time when CIL has decided not to renew long-term contracts under this scheme.
As per policy guidelines, the tenure of fuel supply agreements (FSAs) against these auctions was five years, which was initially proposed for extension for another five years upon mutual agreement.
However, the company has informed that the expiring FSA contracts under tranches II and III of linkage auctions held during January-November, 2017 would not be renewed beyond five years. Similar instruction was also issued in case of contracts under tranche-I auctions.
In addition, the non-power sector was compelled to procure coal at high prices at regular auctions as a result of the prevailing supply prioritisation for power sector amid robust demand.
Due to lower offerings, coal allocation in the regular auctions by CIL subsidiaries has decreased 59% y-o-y to 24.46 million tonnes during April-October, 2022, while bid premium against the sales zoomed to 321% as against 44% in the year-ago period.
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