Coal linkages, or long-term supply of fuel to sectors such as steel, cement, and aluminium, will now be granted only through electronic auctions. A decision to this effect was taken by the Cabinet Committee on Economic Affairs here on Wednesday.
The auction route will be followed for all future contracts, once the existing fuel supply agreements (FSAs) lapse. For public sector units, the existing FSAs will be renewed, but if the requirement is beyond FSA quantity, linkages will happen through the auction route. For urea units, the FSA route will continue.
Unlike the coal mine auctions, which were conducted by the Coal Ministry, the fuel linkage will be auctioned by Coal India Ltd and Singareni Collieries Company Ltd (SCCL). “The process of granting coal linkage was not fully transparent. There were several complaints about the process. The auction will bring transparency and provide equal opportunity for all consumers,” said Piyush Goyal, Minister of State (Independent Charge) for Power, Coal and New & Renewable Energy.
According to an official statement, “Twenty-five per cent of incremental Coal India Limited (CIL) / Singareni Collieries production during 2015-16 will be put up for auction.” The quantity will be earmarked for each individual sector – cement, sponge iron, steel, aluminium and others.
“We have drawn out the schedule. In the next 7-10 days, the exercise to commence auctions will begin. By April-end, we should be able to hold auctions. In the first round, 24 million tonnes of coal could be put up for auction. This would include the quantity of the lapsed FSAs,” Coal Secretary Anil Swarup said.
The Coal Ministry had been drawing up a plan for auctioning linkages to the non-power sector over 2015.
An Inter-Ministerial Committee was constituted in January 2015 to vet various structures and models for competitive bidding.
Till now, granting of coal linkages was governed by the New Coal Distribution Policy of October 2007.
Requests for coal linkages were forwarded to the administrative ministries for their recommendations, which were then placed before the Standing Linkage Committee. But, despite the policy, no new linkage has been allotted to the non-power sector since 2007, the statement added.