India: BCCL tweaks Tranche VII coking coal linkage auction rules, secures active participation
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- 2.4 mnt coking coal booked in Tranche VII auction at 6% premium
- BCCL initiates monetisation process for four washeries
- India's coking coal demand to reach over 90 mnt by FY'30
In a significant step toward bolstering India's self-reliance in the steel sector, Bharat Coking Coal Limited (BCCL), a subsidiary of Coal India Limited (CIL), has been at the forefront of 'Mission Coking Coal', a crucial component of the 'Aatmnirbhar Bharat' initiative. As India's largest producer of coking coal, BCCL holds the key to reducing the nation's dependence on imported coal, a critical resource for steel production.
Recognising the challenges that lie ahead, BCCL has adopted a proactive approach to promote import substitution. One of the main reforms it has introduced is a more flexible, transparent, and attractive auction process aimed at enhancing participation from the country's steel producers. This reform follows the lackluster results of the previous Tranche VI auction, prompting BCCL to rethink its strategy.
Key reforms boost participation
The key reform measure has been the introduction of a consortium bidding system. Under this model, multiple small consumers are able to pool their resources and collectively bid, making the auction process more accessible to a broader range of stakeholders. This shift has allowed smaller players, who might not have been able to bid independently, to participate in the auction.
Another significant reform has been the approval of amendments in eligibility norms for linkage auction bidders. BCCL has proposed allowing a consortium to include steel plants, existing or new coking coal washeries, and other plants capable of consuming the power coal by-products from the washeries. This concept was quickly approved by CIL, leading to the finalisation of a new Scheme Document for Linkage Auction Tranche VII for the steel sub-sector.
By maintaining direct communication with potential buyers, BCCL has been able to address concerns, clarify doubts, and provide a clear understanding of the auction process and its benefits. This active follow-up, coupled with increased awareness about the scheme, has resulted in a significant improvement in participation during Tranche VII.
Active response, hike in bids
The outcome of these efforts was clearly visible in the results of the Tranche VII auction held from 20-24 September, 2024. BCCL offered a total of 3.36 million tonnes (mnt) of coking coal, and 2.40 mnt was successfully booked by consumers in the steel sector-a record achievement.
JSW Steel emerged as the largest bidder followed by Tata Steel. Other participants included NMDC Steel Limited, with various grades of washed coking coal, Washery Grades II, III, and IV, as well as Steel Grade II, being offered. The auction achieved a weighted average premium of 6%, reflecting strong demand for the domestic coking coal resource.
"Indian steel producers have participated in a big way in domestic coking coal linkages under 'Atmanirbhar Bharat'. The positive impact is that this will reduce import dependency and consumers can now avoid, to an extent, the uncertainty surrounding international index pricing methodology," a senior official of a leading domestic steel mill told BigMint.
Monetisation of washeries
BCCL's successful Tranche VII auction underscores its commitment to enhancing the utilisation of domestic coking coal, a crucial step toward reducing India's reliance on imports. The company is now looking forward to the next auction, expected to take place in the next 3-4 months. Steel mills that missed out on this round are expected to participate and secure supplies, further lowering their dependence on imported coal.
In tandem with the auction efforts, BCCL has initiated the monetisation process of four washeries-Dugda, Sudamdih, Madhuban Old, and Mohuda. These washeries are expected to attract bids from major players, providing additional capacity to process the coal booked during the auctions.
BCCL's efforts, supported by CIL, not only benefit the steel industry by securing a long-term, reliable source of domestic coking coal but also align with India's broader goals of achieving self-sufficiency.
BigMint estimates that India's demand for coking coal (excluding PCI) in the steel industry is set to rise from 64 mnt in FY'24 to 94 mnt by FY'30. Share of imports was 57 mnt in FY'24. As the country moves towards reducing its dependence on imported coal, BCCL's efforts in promoting sustainable utilisation of domestic resources continue to be a vital part of the government's 'Mission Coking Coal'.