Coal India to be fined if e-auction supplies not met

State-run Coal India is the only firm allowed to sell coal through e-auctions. The provision of penalty would now be part of the e-auction contracts going ahead, they said. 

So far, a penalty was imposed only on buyers who failed to lift the coal they had successfully bid for.

“The latest move is expected to make the contract equitable and fair. So far, Coal India used to forfeit the security deposit of consumers, as a penalty, in case the latter failed to lift the quantity they had successfully bid for through e-auction route. There was no penalty on Coal India in case it failed to supply the committed amount," said one of the two people mentioned above.

“Now provision for penalty on Coal India has also been introduced. It will make the contract more balanced and fair." 

Also Read: Coal India to supply more coal to power plants than annual contracted quantity

The earnest money deposit or security deposit paid by the consumers currently stands at ₹150 per tonne of coal.

Along with providing for equitable contract terms, the intention is also to ensure maximum possible supplies of coal from the company, at a time when there is abundant availability of coal. Production by commercial and captive coal mines has picked up, while demand has weakened of late.

Concessions for buyers

Coal India has announced concessions for buyers of late to try and revive demand for its coal. 

In July, it proposed to relax the rules for e-auctions and asked its subsidiaries to increase their sales through such auctions in the next two quarters. 

Coal India directed all its subsidiaries, except Northern Coalfields Limited, to offer up to 40% of their production in e-auctions during the second and third quarters of the ongoing fiscal year. Usually about 20% of their production was sold through e-auctions. Further, the earnest money deposit was also lowered ₹500 to ₹150 per tonne.

Also Read: Coal India plans to ease e-auction rules to stoke demand

In the case of long-term supply contracts too, Coal India has announced changes in norms to boost sales. On 13 August, it announced plans to supply more coal to power plants over and above their annual contracted quantities (ACQs). The company said: "The fillip for CIL is that, it would boost its supplies at a time when coal demand is showing signs of slackening."

The second person mentioned above said that the move to boost demand and ensure buyers of Coal India's product get a "fairer" deal comes at a time when the "monopolistic" status of Coal India is being challenged by the growing numbers private commercial and captive mines post the opening up of the sector in 2020.

In the first quarter (April-June) of FY25, production from captive and commercial mines stood at 39.53 million tonnes, a 35% increase from the 29.26 million tonnes produced in the same period of the previous fiscal.

Over the same period, Coal India's production increased 8% to 189.3 million tonnes.

Although at a nascent stage, the signs of growing competition can be seen in the fact that state-run NTPC has for the first time decided to procure thermal coal from commercial mines. In July the power generation major finalized a plan to procure 1 million tonnes of coal from commercial miners. It is expected to issue a tender soon.

India is looking to end its import dependence on coal used in power generation by the end of the next financial year, leading to an unprecedented growth in production. In the last fiscal, India's coal production touched a new high of 997.4 million tonnes, marking an 11.67% increase from the previous year. 

This year (FY25), the government aims to breach the 1 billion- tonne mark and take production to 1.08 billion tonne. With the country seeking to go net-zero by 2070, the window for production and utilization of the fossil fuel is fast closing leading to the rush for widening and diversifying the market of the mineral.

Queries sent to the union ministry of coal and Coal India remained unanswered till press time.