Coal India Urges Subsidiaries To Avoid E-Auctions Amid Supply Crunch

Coal India Ltd. has advised its subsidiaries to refrain from conducting e-auctions as depleting stocks of the solid fuel at thermal power plants across the country is leading to an acute energy crisis and power blackouts in many states.

The world’s largest miner of the solid fuel, according to an internal note that was reviewed by BloombergQuint, has urged the subsidiaries to wait till the situation stabilises.

With thermal power plants—that make up 70% of India’s energy mix—facing low stocks, Coal India has prioritised supplies to these generators by replenish their dwindling supplies.

It has also suggested that liquidation of slow-moving stock through e-auction route should be done without affecting dispatches to the power sector and with proper justification to the company before such auction is planned, the note said.

E-auctions are a mechanism to provide coal to buyers who are unable to source it from the available institutional framework.

Amid the shortage, generators and some industrial users are forced to buy electricity at the power exchange, Bloomberg reported on Oct. 11. Spot prices on the Indian Energy Exchange Ltd. have more than tripled over the past two weeks, reaching Rs 16.42 a kilowatt hour on Monday.

“This is only a temporary prioritisation, in the interest of the nation, to tide over the low coal stock situation at the stressed power plants and scale up supplies to them,” a Coal India spokesperson said in an emailed response to BloombergQuint. “It doesn’t mean stoppage of e-auction format.”

The company is increasing its production and off-take steadily. For the past four days supplies to power sector are consistently at 1.61 million tonnes per day, the spokesperson said, adding once the situation stabilises, expectedly within a short time, and stock at coal-fired plants attains comfort level, other sectors will be brought back to their regular supply level.

The company clarified that supplies to the non-power sector during the first six months of the ongoing fiscal stood at a little over 62 million tonnes. That’s a 10% year-on-year growth and 11% higher than the Covid-19-free April-September 2019.

“Owing to the skyrocketing coal prices at international markets all consumers have been vying for domestic coal, hiking up the demand,” the company said. Instead of restricting coal intake, had the power utilities stocked up coal from October 2020 till February this year, as was repeatedly requested by CIL’s subsidiaries, stock position at the plants would have been better, it said.

Shares of Coal India fell for the third straight session on Thursday, but have gained as much as 27% over the last one month aided by a higher e-auction premium, increase in demand by power plants and a potential price hike.