Coal India sells around 90 million tonnes of coal through the e-auction route
Coal India Ltd expects to sell close to 80-90 million tonnes (million tonnes) of coal through the e-auction platform this year at an average premium of around 300 percent over the notified price, backed by higher demand and a surge in international coal prices. While in volume terms, it may be marginally lower than the total sales through e-auction registered last year, the realizations are expected to be much higher due to the enormous premium over notified price.
The state-owned miner has been earning close to ₹4,400-4,500 a tonne on sale through the e-auction route this year compared to the average realization of around ₹1,400-1,500 a tonne through the FSA (fuel supply agreement) route. It had earned a premium of approximately 30 percent over the notified price (or close to ₹1,570 a tonne) during the same period last year.
It is to be noted that a higher sale through the auction route would help the company garner better profitability as the average price realization on e-auction is usually better than the sale through the FSA route.
According to Pramod Agarwal, Chairman and Managing Director, CIL, sales through the e-auction route might get curtailed if the demand for power increases substantially. However, as production starts picking up in the coming months, the anticipated drop in demand from the power sector would help push up e-auction volumes.
"E-auction price in the first quarter was around ₹4,340, and we sold close to 20 million tonnes. I don't have a figure right now for what quantity we have auctioned in Q2, but I presume that this trend of about 20 to 25 million tonnes will continue throughout the year. We will end the year with about 80 to 90 million tonnes of e-auction coal. But this depends on how the demand for the power comes up. If the demand for power increases substantially, our ability to do the e-auction reduces. Price as of now is still very high, and in certain cases, we are getting about 4,500 or even 300 percent of the premium. So, this range will be maintained if it does not increase further. But at least this range will be maintained for e-auction price as well," Agarwal said in the latest analyst transcript.
CIL is allowed to auction up to 20 percent of its coal production through e-auction, and it typically sells close to 16-18 percent of the volume as it prioritizes the power sector. Whenever demand from the power sector increases, its sale through the e-auction platform reduces.
However, Agarwal was hopeful that the e-auction volume would increase in the coming months with the energy sector's demand going down, as has been the trend. The need for power goes down in October, November, and December, and the coal requirement also goes down. The average stock at powerhouses had also improved to close to 28-29 million tonnes compared to the same period last year when it was around 10-12 million.
"These extra 16 million tonnes will give them a lot of leverage, and this will help us in giving coal to non-power sector also, and this is not likely for next few days, perhaps the stock may go down. But after that, from October onwards or after the 20th of September, the stocks of the powerhouses are unlikely to go down. That's whatever trend we have seen, but nobody can say or confirm it because it depends greatly on the monsoon condition and the temperature. So, that is the situation. So, e- auction volume should increase in the coming months," he said.