CIL to start e-auction for power firms without FSAs

State-owned Coal India Ltd (CIL) may see a surge in its bottom line in the coming quarters, as the miner for the first time will start selling coal through e-auction windows to power plants not having fuel supply agreements (FSA).

There will be two e-auction windows, apart from the existing one. The first e-auction window will be for plants having power purchase agreements (PPAs) and the floor price in this case will be 20 per cent more than CIL's notified price at the time of bidding. Power price under PPAs with the distribution companies are arrived after rate-based bidding and approved by the regulator.

The second window will be for plants not having PPAs or having a short-term PPA. For such companies, bidding will start at 40 per cent more than the CIL's notified price.

The process of selling coal to power plants not having FSAs will continue at least for the next eight to nine months, until the new mechanism of auctioning the FSAs are being formulated.

"Since we are in the process of devising a transparent mechanism to ensure equal availability of coal to consumers of coal to power industry and other non-regulated sector; in the interim, till the robust framework is formulated, we are continuing with the coal supply as per the CCEA decision, 2013. And for those who do not have linkage under the CCEA decision of 2013, we are forming two e-auction windows," Union Coal minister Piyush Goyal said today.

"Initially in both these windows we will put 5 MT coal each, and then we will expand it looking at the response we receive," he said responding to a query from the Business Standard.

In the existing window, smaller power companies and non-power users are the primary takers of e-auctioned coal as most of the electricity generation companies do not bid aggressively in view of tariff caps.

CIL's profitability to a large extent is dependent on the realisation from e-auction sales. While a small part of overall volumes, e-action sales contribute 35-40 per cent of total Ebitda (earnings before interest, taxes, depreciation and amortisation). Hence, higher e-auction volumes would mean higher profitability in the coming quarters.

The coal ministry recently removed the cap on Coal India's e-auction sales, allowing it to sell about 10 per cent of its annual offtake via e-auction. Goyal also indicated the sale of coal to power companies via two separate exclusive windows, is over and above the existing e-auction volume as CIL has sufficient coal to auction.

"There is no upper or lower cap , it is an operational decision. Last year around this time, there was an acute coal shortage. But, now we have surplus coal in every plant so volume will not be problem," he noted.

Coal India has begun 2015-16 on a strong note registering a 12 per cent gowth in output at 121.33 million tonnes (MT) in the first quarter.