Key Takeaways from CIL Pre-Auctions Consumer Conference

A pre-auctions consumer conference was held by Coal India Limited (CIL) at Coal Bhawan in Kolkata on December 6. The conference was chaired by Satyendra Nath Tiwari, Director (Marketing), CIL, and the flood of queries from owners of cement, sponge iron and power companies present on the occasion were fielded by the managing directors of the various subsidiaries of CIL.

The fifth tranche of the linkage auctions will be held for the sponge iron, cement, CPP and other industries, among them non-coking and coking coal users. A volume of 80.5 MnT of coal has been auctioned in the preceding four tranches. Two million tonnes of coal has been earmarked for the steel industry in consonance with the government's policy to prioritize the steel sector and another 2.5 MnT of coking coal has been auctioned off to other users.

The linkage auctions follow the principle of non-discriminatory ascending block auctions" which, first of all, seek to address the needs of starving power plants and other users. The auctions are being conducted on the MSTC platform. The auctions are for coal linkages that expire in five years, with the parameter being that the normative requirements of users will be met on a priority basis. March 31, 2020 is the cut-off date for the tranche 5 auctions.

Three lots of auctions will be conducted on a day, with the first lot starting at 11 am in the morning, the second at 2 pm in the afternoon and the last one at 5 pm in the evening. The first round of auctions will last 15 minutes and bids will be entertained for eight minutes for the subsequent rounds. The total annual requirement of users will be the guiding principle of the auctions.

Bidders will have to register on the MSTC portal, which is to be followed by RPF submission and subsequent bidding. Sponge iron manufacturers will have to specify their total capacity in terms of TPD (tonnes per day) and the quantity specified in the fuel supply agreement (FSA) with CIL. In case there is overbooking in the first round, the second round will invite a premium of INR 10 in the event of 100%-120% of overbooking. Similarly, a premium of INR 50 will be charged for overbooking to the tune of 200%-300%.

A prospective buyer has to participate in the first round of auctions in order to be able to participate in the subsequent rounds and s/he has to bid in every successive round for the quantity that is required. A bidder, however, cannot increase his bid in the following rounds. In sync with the Coal Ministry's guideline of treating all sectors on an equal footing, IRLC has been issued for all sectors, instead of just the power sector.

The managing directors of the different coalfields participated on the Q&A session that followed the conference. Responding to a query, the CMD of Western Coalfields Limited said that premiums have been increased for 11 mines of the 66 mines under the WCL and this has come as a blow to industries based in Central India. However, WCL is seeking to amalgamate the costly as well as cheap coals from all its mines into one basket with an eye on providing relief to consumers.

A clutch of crucial questions were raised by hard and soft coke manufacturers relating to the fact that steam grade coal is being provided to hard coke manufacturers who require washery grade 2 coal. Tiwari in his reply pointed out that the lifting trend of coking coal of hard coke manufacturers is 50,000 tonnes and BCCL is setting up new washeries for low volatile metallurgical coal.

Tiwari concluded the proceedings on a positive note saying that availability of coal is on the rise and the December-March quarter will be a "good time" for consumers. Current production levels are touching 1.9 MnT per day. He assured that the non-regulated sector will get to avail of more coal in the days to come.