India’s Coal Ministry in no rush with coal auctions


India’s Coal Ministry in no rush with coal auctions

09 Feb, 2017 Michael Peters  

KOLKATA ( – India’s Coal Ministry has decided not to rush through the auction of coal supply linkage to power companies in light of the high availability of the fuel, even though the auction of such linkages would be done for non-power industries.

The rules for the auction of coal linkage to the power sector have been compiled and the Coal Ministry would secure inter-ministerial consultations and approval of the Union Cabinet shortly, however the government was in ‘no hurry’ to hold auction for the power sector as there was sufficient coal stocks available for power plants to procure on spot basis, a Ministry official said.

He said that in the first tranche Coal India Limited (CIL) had earmarked about 25-million ton of coal for supplies for thermal power plants through auction of linkages but there was no compelling reason to hold such auctions immediately as most plants were either carrying sufficient stocks or readily available from CIL.

“The government was never in a hurry to auction of linkages to the power sector as there was sufficient availability of coal for all sectors in the country,” Power Minister Piyush Goyal said in a recent statement to local media.

However, a section of government officials said, off the record, that the moot point was that ‘sufficient availability’ while a reality was not a result of positives on the supply side of coal but the negatives of falling demand from the key consuming sector-thermal power plants.

The absence of any rush to go ahead with linkage auction was more of a compulsion since against backdrop of such falling demand few thermal power companies would be keen to commit significant capital upfront to bid at the auctions.

According to official government data released last month, the average plant load factor (PLF) of thermal power companies had fallen below the 60% mark, the lowest in the past ten years.

The data showed that during April-December 2016, average PLF was down at 59.64%, a decadal low against 61.58% during corresponding period of previous year.  The sharp downturn was underlined by the fact that PLF averaged at 74% in 2011/12.

In a government note on the power sector, it was pointed out that while capacity addition was growing at around 14% per year, consumption of electricity, a factor of falling industrial production and capacity use was a mere 6% per year.

This was reflected in off-take of coal which during the period April-December 2016 was reported by CIL at 392-million tonnes well below the miner’s target of 434-million tonnes for the same period.

However, a Coal Ministry official said that coal supply linkage would be conducted for non-power sectors like cement, sponge iron and steel where end produce of these industries were not under any government price regulation unlike electricity.

CIL was expected to set aside an estimated 15-million ton for first round of such linkage auction, he added.