Coal India to Revamp E-Auction Norms

Coal India Limited (CIL) is set to make significant changes to its e-auction norms to better meet the local coal demand. The company aims to make the auction process more accessible and efficient by implementing several new measures. These steps are expected to streamline the process and encourage greater participation from consumers.

Lowering Earnest Money Deposit

One of the major changes includes reducing the Earnest Money Deposit (EMD) required for participation in e-auctions. The EMD will be lowered from Rs. 500 per ton of coal to Rs. 150 per ton. This substantial reduction is intended to ease the financial burden on consumers, allowing them to participate in more auctions with the same capital. The increased cash availability will enable consumers to switch to additional auctions, thereby potentially increasing coal procurement.

Enhancing Auction Quantities

CIL is also ramping up the quantities of coal offered under the auction hammer. This move is designed to ensure that the existing market demand for coal is fully met. By increasing the availability of coal through e-auctions, CIL hopes to address any latent demand that may exist. The company has directed its subsidiary companies, with the exception of Northern Coalfields Limited, to increase their offer quantity under e-auction to 40% of their total production for the second and third quarters of FY 2025.

Streamlining the Auction Process

The auction process itself is set to undergo significant changes. A concept note has been circulated to e-auction bidders to seek their feedback on the proposed changes. Key changes include the introduction of a three-hour auction window to replace the previous long-drawn process. Additionally, consumers will be allowed to change their mode of transport from rail to road post-bidding without any additional premium. Furthermore, a single bidder will now be able to place a maximum of four bids against each basket, compared to the earlier restriction of one bid.

Improving Coal Supply and Loading Efficiency

CIL is already supplying improved quantities of coal, as evidenced by its loading statistics. From CIL’s sidings alone, the average rake loading in the current fiscal year has been 316.7 per day, marking an increase of 40 rakes per day over the same period last year. This increased supply capability is part of CIL’s broader strategy to meet any latent demand and ensure that domestic coal requirements are fully satisfied.

Flexible Reserve Pricing

In addition to these changes, subsidiaries have been given the flexibility to fix their reserve prices by considering various factors such as the local demand-supply scenario, different sources, and optimizing various modes of loading. This flexibility is expected to help subsidiaries better respond to market conditions and optimize their auction strategies.

Meeting Domestic Demand

Coal stock at thermal power plants is currently at nearly 45 million tons, which is about 33% more compared to the same period last year. CIL’s intention is to supply coal to meet the full domestic demand and cater to any latent demand as well. By making these adjustments to the e-auction norms, CIL aims to create a more efficient and consumer-friendly auction process, ensuring that the local coal market is adequately supplied.

Conclusion

Coal India Limited’s decision to revamp its e-auction norms is a proactive step towards meeting the growing domestic demand for coal. The reduction in EMD, increased auction quantities, streamlined process, and flexible pricing strategies are all aimed at encouraging greater participation and ensuring a steady supply of coal to meet market needs. These changes reflect CIL’s commitment to optimizing its operations and supporting the energy needs of the country.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. The information is based on various secondary sources on the internet and is subject to change. Please consult with a financial expert before making investment decisions.