CIL subsidiaries resort to old regime of price fixation

Ending the temporary provision for providing relief to its customers, Coal India Ltd (CIL) has restored the earlier practice of vesting power to subsidiaries for affixing the reserve price as per market condition.

It was only in Oct ’20, the company had introduced 10% premium over notified price of coal for evaluating the reserve price in auctions, before which the floor price was fixed equal to the notified price with zero add-on during the first half of this fiscal.

The measure came as a big relief to the consumers in the midst of sluggish coal demand induced by COVID-19, however, with gradual restoration in demand CIL agreed upon increasing the upper cap on coal prices from Nov ’20 onward.

Recently, Northern Coalfields Ltd (NCL), the subsidiary of CIL located in Madhya Pradesh, has fixed reserve price 30% higher than the notified price in the spot auction scheduled on 30 Nov ’20.

Coal offered in NCL’s spot auction

Price in INR/t

Similarly, South Eastern Coalfields Ltd (SECL) has increased the upper cap to 20% for affixing the reserve price in monthly spot auction. In contrast, Mahanadi Coalfields Ltd (MCL), the other major coal producing subsidiary, has kept upper cap on notified price unchanged at 10% for this month’s auction.

Still on the path of recovery, CIL had fetched gain of 13% over notified price for coal sales via auction in Oct ’20, which was assessed at 43% in the year-ago month. Although, a slight rise in coal demand has been recorded as a result of enhanced power generation, it would be interesting to note the response of the buyers to these increased coal prices.