Coal Ministry has proposed to create a new window in the non-regulated sector (NRS) Linkage Auction Policy 2016, through which any domestic buyer can participate in the auction to procure the commodity for up to 15 years without any end use requirement.
“Government is contemplating to enable long-term coal linkages to any domestic buyer of coal for own consumption, sale or for any other purpose. This would entail amendment to the NRS Linkage Auction Policy of 2016 and 2020,” Coal Ministry said in a note last week.
It also held consultations with stakeholders’ on the issue and has released an approach paper covering the modalities for the proposed amendments and has sought responses from stakeholders on the same.
This assumes significance as NRS consumers include cement, steel, sponge iron and captive power units, which are an important part of the infrastructure sector. Long term coal linkages without end use restrictions has been a long standing demand.
New auction window
“Allocation of coal linkages on auction basis for sectors without requirement of any specified end use by adding a separate window in the NRS Linkage Auction Policy of 2016 wherein any domestic buyer requiring coal can participate in the linkage auction. This new window shall be termed as coal linkage for own consumption, sale or for any other purpose,” the Ministry proposed.
The present auction for specified end-user sub-sectors, as per the NRS Linkage Auction Policy, 20l6, shall continue, it added.
The Ministry proposed that an auction under the new window will be conducted after auctions of end-use specific sub-sectors (according to the 2016 linkage policy) take place.
The base or floor price of any source for the auction is to be fixed at reserve price (RP) not below the notified price, as may be decided by the coal company. The RP for linkage auctions will be indexed by Coal India (CIL) and Singareni Collieries Company (SCCL) for subsequent years. However, the bid premium shall remain constant over the contract period.
The tenure of the fuel supply agreements (FSAs) may be for a maximum period of 15 years, it has proposed.
It has also communicated to ministries to finalise norms for coal consumption of the industries under their administrative control and communicate the same. If the ministries do not share these norms, then the norms finalised by coal companies will be considered for assessment of normative requirements.
The government has been increasing its spending in the sector with the aim to expand India’s manufacturing capabilities and enhance employment generation opportunities and sectors such as cement and steel are critical for the growth of the sector.
In FY24, the coal mining PSUs dispatched almost 163 million tonnes of coal to the NRS sector, a growth of around 22 per cent on an annual basis. Captive power plants (CPP) accounted for the majority of the despatch followed by sponge iron, steel and cement.