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Bids at CIL e-auctions way above notified prices

Coal India Ltd, the country’s largest mining company, sold 9.3 million tonnes of coal — roughly 10 per cent of its production — between April 10 and June 10 through e-auction at Rs.1,747 per tonne.
Nothing unusual, except that this was as much as 67 per cent higher than the notified price of Rs.1,047 per tonne.
E-auctioning of coal was launched by the government in 2007 to supply the non-core sector and traders at a “market determined price”. The current high price at the auction, settled after over 16,000 bids were placed, allowed the company to garner additional revenue of around Rs.650 crore over the notified price of Rs.974 crore of the total allocated quantity of coal.
The increase was even higher than the overall 60 per cent increase in the e-auction price last financial year above the notified price, which had earned for CIL extra revenue of Rs.536 on every tonne sold. Overall, e-marketing yielded additional revenue of Rs.2,311 crore over the notified price for the company last year. In 2008-09, too, Coal had sold through e-auction at a rate 58 per cent higher than the notified price.
The company’s cost of coal production has seen a 32 per cent jump to $16.1 per tonne in the past five years and experts believe rising prices at the exchange could prompt it to seek a price rise.
“If the prices are sustained at such high levels for a long time, then it is logical that Coal India will seek an upward price movement. More so, because these high price points at the exchange are not caused by temporary shortages,” said a senior analyst from a consultancy firm.
Bids at CIL e-auctions way above notified prices
’s current annual coal production of around 450 million tonnes falls short of the demand by over 50 mt, met by imports. By the end of the current Plan period (2012), the country is likely to raise production to 629 mt, still fall short of demand by 83 mt, putting additional pressure on imports.
Coal , however, has denied any plans for a price rise soon. “As of now, we are not planning any hike in the prices. Any hike in the notified price of coal which we supply to regulated sectors like power and steel further increases the consumer’s burden,” said a senior official from the company.
Another analyst shared a similar view. “The e-auction is too shallow a market to give any long-term price signals. The prices are high at the exchange as production is not keeping pace with the demand,” he said. CIL had raised prices by an average of 11 per cent in October last year. This had increased the cost of coal for the power sector by Rs.77 a tonne and of electricity by five paise per unit.
The Navratna PSU is launching its Initial Public Offer to raise up to Rs.15,000 crore from the market soon.

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