With the softening demand for coal, state-owned Coal India will hold long-term special forward auction for power producers with flexible lifting period of up to 3 years. According to an official familiar with the new development, a long-term special forward e-auction for lifting period up to three years is being launched for power producers. He further added that Coal India Ltd (CIL) will soon notify the detailed offer, schedule dates for auction.
Power utilities consume about 75 to 77 per cent of the total coal, as per the estimates. According to PwC's Kameswara Rao it is easier to auction for 3 to 5 years, as states will not have to commit to any longer- term generation capacity. This will serve existing power plants which do not have a linkage but will not attract new capacity addition, he also said.
The design of auction of coal linkage is made complex by the economic and market realities of how long term power itself is competitively procured. It's understandable that it's taking a longer time to finalize it, the official said. He also added that the current demand for coal is soft but there are signs of some improvement.
As per him, electricity demand growth remains modest at 5 to 6 per cent over last year, and market prices remain modest even for peak periods. But this could change in the next two quarters when the higher imported coal prices start to reflect as contracts are re-priced.
Coal India, which accounts for over 80 per cent of the domestic coal production, is eyeing about 1 billion tonne of output by the year 2020. The PSU is looking at 598 million tonne during the period 2016-17.
On the market front, Coal India share price was seen trading at Rs 304.65, down by 0.88 per cent from yesterday’s closing price.
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