India: CIL auction premiums remain stable for third month in row

The monthly average bid premium in spot e-auctions conducted by Coal India Ltd. (CIL) stood at 183% in February 2023, almost stable compared to the previous couple of months. The bid premium over the notified price was assessed at 182% in January, while it was 179% in December 2022.

Meanwhile, coal volumes offered in spot e-auctions rose from 3.2 mnt in January to 11.8 mnt in February, up almost 270% m-o-m.

Notably, almost the entire quantity offered in the e-auctions  was booked at INR 5,203 crore.

The bid premium dropped as against 270% in February 2022. However, it was still higher compared to 121% for sales via different auction schemes in February last year.

Auction volumes surge

The increase in volumes offered for auctions in February was a combined result of below factors:

• Northern Coalfields Ltd (NCL) and Mahanadi Coalfields Ltd (MCL) did not conduct auctions in January 2023.
• MCL and South Eastern Coalfields Ltd (SECL) put forward 3.74 mnt and 3.64 mnt of coal for auction in February, respectively, which was more than the total offering of 3.2 mnt by CIL subsidiaries in January.
• Every CIL subsidiary put forward higher volumes in February compared to the prior month.
• SECL provided four times more coal in February auctions compared to January.

Why didn’t bid premiums fall?

Aggressive bidding in MCL’s auction stopped the anticipated decline in bid premium because of the rise in offerings.

MCL’s bid premium over the prices that were notified in February was 283%, up from 144% in December 2022. In January, the miner did not conduct auctions.

Since the quantity supplied by MCL represents roughly 32% of the overall quantity offered by CIL for the month, the increase in the bid premium had a greater impact.

Nonetheless, the bid premium decreased for all the other subsidiaries besides MCL. The steepest decline was seen in the case of Western Coalfields Ltd.

 Premium surges in Apr’22- Jan’23

CIL’s bid premium in spot e-auctions was 257% in the April 2022-Feburary 2023 period. However, the premium for spot auctions during April 2021-Feburary 2022 was 107%, thereby indicating that bid prices have risen significantly in FY23 compared to FY22.