KOLKATA (miningweekly.com) -  India’s Coal Ministry is likely to give greater flexibility to producer Coal India Limited (CIL) to increase sale offers through the e-auction route to improve realisations, on condition that growth in mine production is maintained.

The move would enable CIL to increase volumes for sales through e-auction, which generally fetched a 30% to 40% higher price than the “notified sales price”, the benchmark price at which the dry fuel was supplied to thermal power plants.

Normally, the Coal Ministry set a cap on e-auction sales to ensure that sufficient volumes were available for supplies to thermal power plants. Two years ago, the cap was set in the range of 10% to 12% of CIL’s total production. But last November the cap had been reduced to 7% of production.

The Ministry, in a first move, had once again relaxed the cap on e-auction sales to 10% of production and an official said that subject to the country’s largest miner’s ability to maintain production growth, CIL would be permitted to progressively increase auction sale volumes in tandem with increases in production.

As an immediate impact, CIL’s auction sales in the current year was expected to go up to 55-million tonnes, up from 45-million tonnes during previous fiscal and a further increase in the limit would keep auction volumes rising.

Considering that over half of CIL’s production went towards supplies to thermal power plant at notified price at low margins, to keep electricity tariffs in check, higher auction sales were expected to provide relief to the miner’s realisations and bottom line, the official said.

The relaxation was also significant as CIL had been proposing an upward revision of notified sales price since November last year, but had failed to get the nod from the government.

A tentative trend towards higher coal production and comfortable stocks of fuel with thermal power plants across the country also emboldened the Ministry to divert part of coal production for auction sales and offer CIL the slender leeway to increase revenues at a time when across the board price rises had been kept in abeyance.

For one, during April, CIL achieved a 10% growth in monthly coal production to 32-million tonnes, compared to the corresponding month in the previous year.

At the same time, according to data released by the Central Electricity Authority, coal stocks at 100 thermal power plants in the country were up 16% since mid-March to 30-million tonnes, the highest during the last ten years and sufficient for ensuring generation for 20 days.

The largest thermal power producer, NTPC Limited had also announced that it would not resort to importing coal, at least during the first quarter of the current fiscal, in view of adequate supplies from CIL.