Domestic coal prices in the resellers’ market remained stable this week, after registering a drop in the previous week. Traders have decided to hold their offers despite selling pressure as they are operating at a lower margin.
The prices of 4,500 gross calorific value (GCV) coal in Wani, Maharashtra were assessed at INR 12,475/t on 30 September while the prices of 5,000 GCV coal in Chhattisgarh’s Bilaspur were assessed at INR 11,750/t. The prices at Wani remained unchanged in contrast with Bilaspur, where these fell marginally by INR 50/t.
The traders were expecting increase in demand because of the upcoming festive season but limited inquiries have dampened their hopes.
CIL’s new e-auction scheme
Meanwhile, despite stagnant market conditions, the talk among the traders was the introduction of new auction policy named “CIL e-auction Scheme 2022”.
In the new policy, coal companies would now float quantity for auction as a cluster of dispatch points instead of coal offerings from individual mines or collieries.
Interestingly, the new scheme has bifurcated the auction into two stages.
- In the first stage, the bidder will bid specifically against the quantity offered in the cluster. This round would determine bid quantity and price and accordingly bid seniority will be decided.
- The second round will be carried out to affix coal allocation as per the choice of mode and loading point indicated by the successful bidders in accordance with the bid seniority.
Concerns raised by market participants
Uncertainty regarding coal allotment: The highest bidder would have the preference in allotment of coal from the desired mode of supply and loading point. In other words, higher the bid seniority more the probability of allotment of desired grade of coal.
As per CoalMint’s observation, the new system driven by bid seniority will promote competitive bidding. However, there will be uncertainty for bidders with lower bid seniority as they may lose out on the desired grade, mode and loading point.
Rail rake unavailability: The biggest concern among traders is higher pendency of rail rakes against coal sold in the previous auctions.
The traders have proposed an extension in the validity period for seeking allotment via rakes which currently is 45 days.
“The non-availability of rakes is so high that even if I have the highest bid seniority, there are minimal chances of allotment within the 45 days period. The concerned authority should increase this time to 90 days,” a trader told CoalMint.
Concerns over cluster grouping: The buyers are also concerned about how loading points are to be grouped in a cluster as it is to determine options for procuring coal and bidding price. The grouping should be such that it could satisfy requirement of buyers, said traders.
Outlook
End-users and traders are worried that the new spot coal auction scheme could increase the bid prices at a time when spurt in prices has already pulled down demand for coal.
Meanwhile, buyers are expecting more flexibility in the auction scheme especially in terms of choosing the mode of supply. Meanwhile, operational improvements in dispatches remain need of the hour.
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