The approval for e-auction by the cabinet committee on economic affairs, or CCEA, is aimed at removing market distortions and ensuring a single rate for all consumers, which will likely attract more consumers toward domestic coal."It shall increase operational efficiencies and lead to an increase in domestic coal demand in the domestic coal market. Besides, the discretion presently vested in coal companies of allocating coal to different end use sectors will be eliminated," the ministry said.
The development comes at a time when India is working on several steps to increase coal production to meet rising domestic demand as supply from state-run Coal India Ltd, or CIL, remains inadequate and surging global prices impact imports. India 's coal demand stood at 905.88 million mt in 2020-21, with domestic supply contributing 690.89 million mt and imports at 214.99 million mt, according to data from the coal ministry.
The e-auction will be subject to CIL and Singareni Collieries Company Ltd., or SCCL, meeting the coal linkage requirements against existing linkages so that supplies to power and non-power sectors at the existing contracted prices are not disrupted, the statement added. Clubbing of the e-auction windows would not involve any additional cost to the coal companies.
Besides, selling coal through a single e-auction window would enable companies to sell coal at market discovered price and also supply coal to gasification projects.
India aims to increase its domestic coal production to 1.2 billion mt by 2023-24 to reduce imports and bridge the demand-supply gap, S&P Global Platts reported Feb. 10. The country also aims to partner with private companies to restart mines that have previously been shut or had their production discontinued by CIL on a revenue sharing model, Platts reported Feb. 25.
CIL has set a target to produce 1 billion mt of coal by 2024. "Hence, with better availability of domestic coal with better price stability and predictability, the import of coal is expected to come down drastically. This would reduce the dependence on imported coal," the ministry said.