Pressure builds on Coal India to reconsider e-auction

Coal India Ltd seems to be coming under increasing pressure from the government and industry stakeholders to stop selling coal through e-auctioning.

That left analysts concerned because the business accounts for 17% of its revenues.

We see increasing risk of policy uncertainty for Coal India as the coal deficit widens, said Pinakin Parekh and Neha Manpuria, analysts with JP Morgan, in a note on Tuesday.

Last fiscal, the company sold 40-45 million tonne of thermal coal through e-auctioning at Rs1,800-2,200 per tonne against a notified price of ¤800-1,200 per tonne.

That’s about 10-12 % of Coal India’s annual production.

At a recent review meeting of the new distribution policy, Parekh and Manpuria said, there were sharp differences between stakeholders. Some asked the company to e-auction only after all fuel supply agreements have been met.

Coal India has been defiant, stating it will not stop because of the financial implications.

But the ministry of coal is also under pressure from the Prime Minister’s Office to not let the growth of these sectors suffer due to coal shortage. Prime Minister Manmohan Singh is set to review coal supply for core sectors in July.

A Coal India official said the company wants to supply only to regulated sectors like power and fertilisers, where shortage affects consumers directly.

Sectors such as cement and steel should manage via imports or pay higher price at e-auctions, he said.