In its first official response to the power ministry’s demand of temporarily stopping spot sales of coal, state-owned Coal India Ltd (CIL) has said the move would not help boost availability at power stations.
Reacting sharply to the demand, India’s monopoly coal producer said restricting e-auction sales would rather push up stock piles at its mines and aggravate coal shortage.
“Around 80 per cent of the e-auction sale is undertaken by road, which normally cannot move to power stations. If e-auction is restricted, quantity to the tune of eight per cent of the overall production (80 per cent of e-auction which moves by road) will result in accretion in pit-head coal stock,” the world’s largest coal producer said in a recent letter to the coal ministry.
“Restricting e-auction would in no way help the power sector,” it said.
The letter was a response to the power ministry’s presentation on the matter to a 12-member group of ministers (GoM) on coal in its June 9 meeting. The company sold 43 million tonne (mt) of coal through e-auction last financial year at a price 83 per cent over the notified price of 920 mt.
Coal India currently has a total of 70 mt of stocks piled up at its mines, even as the country is estimated to face a shortage of 83 mt this financial year. The company attributes the shortages to unavailability of railway rakes for dispatch.
The company, which has recently come under pressure for making profit by selling coal through e-auction at market rates even as it has pulled down commitment under Fuel Supply Agreements (FSAs), also clarified on the issue by invoking its statutory mandate.
“It is not that CIL has been offering coal under e-auction only due to revenue generation. CIL has been restricting e-auction to the level of 10 per cent of its production, as stipulated by the New Coal Distribution Policy (NCDP),” the letter states.
The company has also made it clear that stretching availability for the power sector beyond the current level is not possible. CIL has already increased its current financial year's commitment to the power sector from 327 mt earlier to 347 mt on coal ministry’s intervention against a production of 447 mt.
“As such, the offer is already made at the threshold level and there is no further room for additional offer,” it said.
The power ministry had recently warned that CIL’s failure to meet supply commitments would result in stranded power capacity of 24,000 Mw. “As an immediate measure, CIL must stop e-auction to meet the demand of power sector,” the ministry said in a recent note prepared as an input for the draft cabinet note on coal shortages.
Against a projected production of 452 mt in the current financial year, the company has a committed supply of 463 mt including e-auction. This shortfall of 11 mt, called negative coal balance, rises to 157 mt in case letter of assurance (LoAs) signed by it earlier materialise.
Coal India’s letter to its parent ministry also indicates that its negative balance is projected to increase from 157 mt during the current year to 366 mt at the end of the 12th Plan period in 2017.
CIL alone accounts for over 80 per cent of India’s domestic coal production of 530 mt. The company’s production remained flat at 431 mt last year.
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