Coal consumers resent high floor price of e-auction

Coal consumers across the country have taken exception to the decision of Coal India Limited (CIL) to fix the floor price of coal to be sold through forward e-auction at twice the notified price.

Coal consumers have alleged that CIL was keen on making greater profit through sale of forward e-auction coal without considering the consumers’ interest.

“We took up the issue of higher floor price of coal to be sold through the forward e-auction route with CIL and said that the consumers couldn’t afford to buy the raw material at such a higher price. However, the CIL management said the price of forward e-auction had to be higher as coal produced from underground (UG) mines, which have a higher cost of production, was to be sold through this route”, said an industry source.

The floor price of this coal has to be higher as the cost of coal production from UG mines was higher than that of open cast projects.

H K Vaidya, chief general manager (marketing), CIL, said, “The floor price of coal to be sold through the forward e-auction route would be higher as high-grade and low-ash coal is being offered for sale. Consumers willing to source coal at a cheaper price can have fuel supply agreements with CIL under which coal is being sold at notified prices.”

In 2009-10, 45 million tonnes of coal was to be sold through the e-auction route and 10 per cent of this was proposed to be sold through forward e-auction. The two platforms for forward e-auction are mjunction.com and MSTC.

The consumers were also sore over the delay in signing of the Fuel Supply Agreement (FSA) with CIL. The delay in signing of FSA between CIL and the consumers was attributed to the import clause imposed by CIL in the Letter of Assurance.

According to the coal import clause, it was mandatory for consumers to purchase a mix of imported and domestic coal at a price fixed by CIL to be eligible for signing the FSA with the coal PSU (public sector undertaking).

The consumers objected to this clause as buying imported coal was commercially unviable for them. These coal consumers had attracted the attention of CIL on this issue at a meeting held on March 27 this year.

After nearly four months of dithering, the CIL management had at last given an assurance to relax the clause pertaining to imported coal. As per this assurance, consumers need not give any undertaking for purchasing imported coal for entering into FSA with CIL.