Coal India Limited’s Bid Premium Remains Stable At Spot Auction

Coal India Limited (CIL) has been at the forefront of the Indian coal sector, meeting almost 80% of the country’s total coal requirements. CIL is India’s largest state-owned coal producer and is committed to establishing a spot auction market for coal. The spot auction bid premium is an important factor in determining the cost of coal to the consumer.

Bid premium at spot auctions conducted by CIL in January 2023 stood at 181%, almost stable m-o-m after falling in December 2022. The premium over the notified price was assessed at 178% in December 2022 and 240% in December 2022. In comparison to last year, the bid premium has dropped from 230% in January 2022, however, it is still higher compared to 102% in January 2022 when considering sales via different auction schemes.

Changes In Auction Schemes

Coal sales via auctions were conducted under different sector-based schemes before March 2022, after which the auctions were combined into a single window mode of sales. Compared to spot auctions, (which was the most preferred mode of sale) the drop in premium indicates a gradual recovery in supply and lower bid prices.

Drop In Offerings

In December 2022, all the subsidiaries of CIL conducted auctions, but Northern Coalfields Limited (NCL) and Mahanadi Coalfields Limited (MCL) were notable absentees in January 2023. This resulted in a 43% m-o-m fall in coal offerings in January 2023, with coal offered in auctions at 3.3 mnt, compared to 5.8 mnt in December 2022.

Subsidiary-wise Analysis

Coal India Limited’s subsidiaries saw a decline in bid premiums in January 2023 except for South Eastern Coalfields Limited whose premiums rose due to higher power sector procurement. Due to a lack of coal demand and abundant supply, premiums for other subsidiaries such as Bharat Coking Coal Limited, Central Coalfields Limited, Western Coalfields Limited, and North Eastern Coalfields Limited decreased. Due to MCL’s absence from the auction, SECL offered most of the low-grade coal needed in power production and increased its purchases from Odisha.

Surge In Bid Premium

CIL’s bid premium in the spot e-auction over the notified price was 279% in April 2022-January 2023, compared to 62% in April 2021-January 2022. This surge is the result of a drop in coal offerings, with CIL’s coal sales via e-auctions at 40.2 mnt during April 2022-January 2023, a 74% decrease from the quantity offered in the same period last year.

Insight

The stability in CIL’s bid premium in January 2023, indicates a recovery in coal supply. Most subsidiaries saw a drop in bid premium, except SECL which rose due to procurement from the power sector.

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