The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has given its approval that all allocations of linkages for non-regulated sector, Cement, Steel/Sponge Iron, Aluminium, and Others [excluding Fertilizer (urea) sector], including their CPPs, shall henceforth be auction based. The tenure of Fuel Supply Agreement (FSA) will be as decided by Ministry of Coal from time to time.
It ensures that all market participants of non-regulated sector have a fair chance to secure coal linkage, irrespective of their size.
Key Points
i. There may not be premature termination of FSAs of non-regulated sector as of now. There will be no renewal of existing FSAs of non-regulated sectors [except FSAs of CPSEs and Fertiliser (Urea)] which are maturing in 2015-16 onwards, after completion of their current agreement tenure.
ii. The existing FSAs with Central Public Sector Enterprises (CPSEs) may continue to be renewed on expiry; for additional linkages, CPSEs may participate in auction.
iii. To start with, in the first tranche, the quantities corresponding to FSAs of non-regulated sector [except CPSEs and Fertilizer (Urea)] maturing in 2015-16 onwards and 25% of incremental Coal India Limited (CIL) / Singareni Collieries Company Limited (SCCL) production during 2015-16 over 2014-15 will be put up for auction.
iv. For auction of linkages, separate quantities shall be earmarked for sub-sectors of Non-Regulated sector. The sub-sectors could be Cement, Sponge Iron/Steel, Aluminium, and Others [excluding Fertilizer (urea) sector], including their Captive Power Plants (CPPs) etc. Auctions shall be conducted by CIL/SCCL.
Policy directions will be issued by the Ministry of Coal and will be implemented by CIL/SCCL
Background:
Hon’ble Supreme Court of India vide its judgements in August and September, 2014, had declared 204 coal mines/blocks allocated since 1993 as illegal on the grounds that the procedure followed was arbitrary, Pursuant to this judgment, e-auction of Schedule II and Schedule III Coal Mines was conducted. The same philosophy of non-discretionary allocation could be extended for the coal linkages as well. This would require CIL to allocate linkages through a market-based mechanism.
An Inter-Ministerial Committee (IMC) was constituted in the Ministry of Coal in January, 2015 to consider and examine various structures and implementation models for implementing the competitive bidding for .auction of coal linkages/LoAs and to recommend the optimal structure that would meet the requirement of all the stakeholders. The IMC met 7 times since its constitution. It was decided in the 5th meeting of IMC that auction of linkages for non-regulated sector should be taken up first. An Approach Paper regarding proposed methodology was discussed in the 5m meeting of the IMC and was uploaded on the website of Ministry of Coal (MoC) for inviting comments of the general public and stakeholders.
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