Cabinet decisions: Coal linkage auction for power, steel, cement units

Linkages for 24 mn tonnes from Coal India, Singareni Collieries to be put up in the first year

Moving forward to a market-linked model for awarding fuel supply agreements (FSAs), the government will auction coal linkages to non-regulated sectors such as steel, cement, captive power producers, etc.

“The framework attempts to make coal available to end-users. The proposed auction methodology would lead to price discovery through market mechanism. It ensures all market participants of non-regulated sector have a fair chance to secure coal linkage,” said Piyush Goyal, minister of state for coal, power and renewable energy.

The coal linkages on offer would be from Coal India Limited (CIL) and Singareni Collieries Company (SCCL). So far, such linkages were given out without any bidding.

The process of auction would conclude by April. Coal Secretary Anil Swarup said linkages for 24 million tonnes would be put up in the first year. CIL officials also said the demand from the sector would determine their supply and revenue collection.

According to the drafted mechanism of Supply Controlled Assembled Bid Auction, the coal ministry would determine the opening price. It would, then, keep increasing the price according to the bid given by the participants. The bidding would close once the supply matches the demand — that is, the amount of coal put up for sale equals the amount of bids received.

The existing FSAs won’t be terminated prematurely but these won’t be renewed either. However, the existing FSAs with central public sector enterprises (CPSEs) might be renewed on expiry. For additional linkages, CPSEs might have to participate in auction.

In the first tranche, the quantities corresponding to FSAs of non-regulated maturing in 2015-16 onwards and 25 per cent of incremental CIL/SCCL production during 2015-16 over 2014-15 will be put up for auction.

For auction of linkages, separate quantities shall be earmarked for sub-sectors of non-regulated sectors - cement, sponge iron/steel, aluminium, and others.