State-run miner Coal India Ltd (CIL) has received an overwhelming response for sales of coking coal conducted against the fifth tranche of linkage auctions. The current round was held especially for other (coking) sub-sector involving steel and coke manufacturers.
CIL subsidiaries – Bharat Coking Coal Ltd (BCCL) and Central Coalfields Ltd (CCL) – had together put up 1,000,000 tonnes (t) of coking coal comprising of washery grade-III (W-III) and W-IV specifications for sale. The material was offered from various mines of these subsidiaries of which 999,792 t was booked.
Moreover, the premium recorded for sales in this round of auction was particularly high compared to sales concluded in the earlier rounds.
In case of BCCL, the weighted average bid price for W-III was assessed at INR 8,930/t, while it garnered a premium of 149% over the notified price of INR 3,582/t. For W-IV, bid price of INR 8,817/t received premium of 158% over notified price of INR 3,417/t.
On a similar note, CCL fetched premium of 179% and 276% for sale of W-III and W-IV material, respectively.
Grade-wise summary
Quantity in t | Prices in INR/t exclusive of taxes and other charges.
Overall, coal booked from various mines fetched a price realisation of INR 8,909/t which was 195% higher than the assessed notified price of INR 3,016/t.
Reason for aggressive bidding
The robust sales came on the back of CIL’s decision to not renew long-term contracts for coal supplied under linkage auctions meant for the non-power sector.
It may be recalled that coal sales auctions are held across various tranches for different industries namely sponge iron, cement, captive power, steel and other (non-coking) and other (coking). In fact, auction for other (coking) was the last to be held under the fifth tranche while that for remaining sub-sectors had already been concluded.
As per policy guidelines, the tenure of fuel supply agreement (FSA) against these auctions was five years, which was initially proposed for extension for another five years upon mutual agreement.
However, the company has informed that the expiring FSA contracts under tranches II and III auctions held during January-November, 2017 would not be renewed beyond five years. A similar instruction was also issued in case of contracts under tranche-I auctions.
The decision came as a big blow to the non-power customers who are already facing supply tightness amid CIL’s disparity in coal allocation. As a result, buyers were seen aggressively procuring material to secure fresh supplies against their expiring contracts by placing higher bids.
In a latest development, CIL has come-up with sixth tranche of auctions starting with sales for sponge iron sector. The sale was initially scheduled to start from 23 December 2022, but has been postponed as of now.
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