Possibility of Diversion of E-auction Coal to Power Sector ruled out by Coal Ministry

Economy Current Affairs 2011. Union Coal Ministry on 24 May 2011 ruled out the possibility of diversion to the power sector of the coal being sold by Coal India Ltd (CIL)

Created On: May 25, 2011 17:10 ISTModified On: May 25, 2011 17:10 IST

The Union Coal Ministry on 24 May 2011 ruled out the possibility of diversion to the power sector of the coal being sold by Coal India Ltd (CIL) through the e-auction route thereby rejecting the demand of the Power Ministry.


In a petition to the Power Ministry, the private power producers had sought discontinuation of e-auction sales, accounting for a little over 10 per cent of CIL's 430-million-tonne annual production, to mitigate the demand of the power sector. The Power Ministry wanted the e-auctions to stop until enough coal is supplied to power plants. About 10% of the coal is sold through this electronic auction platform annually. E-auction is a major revenue earner for CIL as coal is sold at 80-90% premium over base price.


CIL intends to sell around 45 million tonnes coal this year through eauction of which around 5 million tonnes is likely to be through forward auction.


E-auction was introduced as per the order of the Supreme Court to ensure easy availability of coal to smaller consumers who do not enjoy linkages. E-auction mainly caters the smaller consumers who prefer to transport the coal by road. It is believed that in the backdrop of the concern for railway rakes, the discontinuation of the auction would only add to the pit head stocks.


Curbing of e-auction will only increase pithead stock. E-auction of coal was stopped due to litigations soon after it was started. It was however resumed after the Supreme Court allowed it.

 

There is already a huge stock of coal lying at pitheads which is creating problems. If e-auction is stopped another 10% stock will accumulate. Currently  CIL's pit head stocks is about 64 million tonnes, down a little from about 70 million tonnes during the beginning of the current financial
As per the national policy, the non-regulated sectors are forced to procure a minimum of 25 per cent of its requirement from the open market.

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