State-run miner, Coal India Ltd. (CIL), has witnessed robust coal sales in the auction carried out under the B (viii-a) policy of the Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI).
These auctions are conducted on a quarterly basis for providing linkage supplies for those power producers who do not have power purchase agreements (PPAs). The latest round was the 12th tranche of auction for January-March, 2023 period.
Indicating preparedness for the upcoming summer where demand for power is expected to surge, the buyers were seen aggressively procuring coal in the auction to replenish their inventories.
Notably, out of the total 5.40 million tonne (mnt) of coal being offered, 5.39 mnt was booked at an average bid price of INR 2,138/t thereby garnering a premium of 139% over the reserve price of INR 894/t assessed for the various grades.
Prices comparatively lower than regular auctions
The product mix offered in the recent SHAKTI auction comprised mostly of non-coking coal in the range of G8-G15, where bulk volume was concentrated in the lower CV band. Plus, there was a single lot of W-IV specification of coking coal.
Interestingly, the highest CV material in the lot, G8, was sold at the reserve price of INR 1,475/t, whereas, the lower CV materials had fetched an average premium of INR 1,418/t over the reserve price. In particular, bids were assessed in excess of INR 2,000/t for W-IV, G10, G11, G13 and G15.
Nevertheless, the prevailing prices were comparatively lower than the bids received against the regular spot auction held by CIL subsidiaries which involves a wider participation from entire gamut of buyers. However, the major drawback is that these SHAKTI auctions are not conducted on a monthly basis.
In January, 2023, bids against G8-G15 material were assessed in range of INR 2,603-6,402/t for spot auctions. In contrast, the bids against similar product mix in SHAKTI auction were in the range of INR 1,475-2,873/t.
Outlook
Despite stringent measures adopted by the government, the coal inventories at plants are rising at a sluggish pace ahead of the material. As on 20 February, 2023, the stock has reached 33.48 mnt as against 33.13 mnt assessed in January-end.
On supply side, CIL subsidiaries had fared better in terms of offering coal via regular spot auctions during February. However, the volume is still below than year-ago levels.
In the near-term, it is expected that power producers would continue to scout the e-auction route to accumulate additional supplies that will support the prices.
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