Coal India Ltd (CIL) has adopted a watchful approach towards selling coal via e-auctions as it stepped up efforts to improve supplies to the power plants facing critical inventory levels.
Sales via a series of auction held during May, 2022 increased to 4.38 million tonnes (mnt). This marked a significant growth from the lows of 1.62 mnt seen in April, 2022 when offering in the auctions were curtailed to augment dispatches via fuel supply agreement (FSAs) amid soaring power demand.
However, auction sales remained subdued compared to the year-ago period when the company had logged bookings of 6.38 mnt of coal in May, 2021 out of the bulk offering of 16.26 mnt.
During May 2022, two of CIL’s largest coal producing subsidiaries — Mahanadi Coalfields (MCL) and South Eastern Coalfields (SECL) — returned to the auctions platform. But, Central Coalfields (CCL) and Northern Coalfields (NCL) stayed on the side-lines. In fact, CCL is yet to conduct any auction in this fiscal.
Bid prices edge higher
With no respite in place from the supply tightness, buyers continued purchasing of coal at higher bid prices at a time global prices were hovering at record-levels. Evidently, the auction sales recorded bid premium of 425% over the notified price for May, 2022. The premium was assessed at 345% in April 2021.
In particular, MCL’s auction saw a spurt in the premium to 749%. For May sales, coal offered, having a notified price of INR 1,000-2,000/t, was booked at bids of INR 8,000-9,000/t levels.
A similar trend was followed in case of the remaining subsidiaries as well. Notably, apart from BCCL, rest of them had fetched bid premium in excess of 200%.
Auction summary for May 2022
Source: CoalMint Research | Quantity in mnt | Prices in INR/t (exclusive of taxes)
In view of the emergent gap between demand and supply of domestic coal, CIL’s offering in the auctions is not expected to improve in the near term, especially when the monsoon season is round the corner.
However, coal prices are likely to ease from the current high levels due to the reduced appetite resulting from the revised duty structure which has adversely affected end-user industries.
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