Spot E-auction Coal Sales Up 28% in FY16 on Higher Domestic Coal Production

Higher coal production in India during FY16 had positively impacted the domestic industry by lowering imports and boosting revenues of domestic producers.

During FY16, coal production in the country increased by 4.8% to 639 MnT over the preceding fiscal. Out of the total production, Coal India Limited (CIL), the largest producer in the country, produced 537 MnT and Singareni Collieries Company Limited (SCCL) produced 60 MnT.

Fiscal-Wise Coal Production in India

Source: Ministry of Coal (Government of India), CIL, SCCL

Leveraging the advantages of increased production in FY16, CIL had managed to boost its annual sales by INR 2,500 crore by implementing strategic e-auction sales to power companies, and firms having captive power plants. The e-auction sales during the fiscal enabled CIL to sale 58 MnT, which was higher than the corresponding sales during the previous fiscal, at 45.2 MnT. The company’s e-action revenue went up by 33% in FY16 than that in FY15.

Source: Ministry of Coal (Government of India), CIL, SCCL

As a matter of fact, e-auctions fetch more revenues than conventional sales. Considering low quality coal, as a typical instance, that is sold at INR 800-1,000 per tonne in the conventional sales through fuel supply agreements (FSA). The price goes up to INR 1,040-1,300 per tonne when sold through e-auctions.

Besides, e-auctions provide all sections of buyers with a level playing field by enabling even buyers without FSAs to participate.

As a consequence of enhanced domestic availability, the cumulative coal imports in FY16 declined by 5.6% to 219 MnT from 232 MnT in FY15, according to data compiled by SteelMint Research.