Indian state-run Coal India Limited sold 2.05 million mt of coal in its first tranche of coal linkage auctions for the sponge iron sector, concluded last week, a company official said Tuesday.
For the first time, CIL offered 3.78 million mt of coal exclusively for sponge iron manufacturers, a sub-sector of non-regulated consumers, of which 2.05 million mt was booked during the auction held June 10-16.
The contract period was for five years and can be extended to 10 years with the mutual agreement of both parties, the official said.
Sponge iron plants across the country currently take around 8 million mt/year of coal from CIL.
Asked about the lukewarm response from sponge iron makers, who did not take up the full amount of coal offered, the CIL official said coal was just one component for sponge iron manufacturers.
"They are dependent on iron ore, which is in short supply," he added.
However, an end-user at a sponge iron plant who didn't participate in the auction said availability of iron ore was not really an issue, but the industry was not faring so well because of low prices for end-product and low demand.
Also, he said Indian coal was inconsistent in quality and there was a problem of last mile connectivity as CIL would not be transporting the coal from the pithead to end-user plants. Transportation cost for plants located far away from the mine would be very high, he added.
CIL has started auctioning coal linkages as part of a government directive to hold auctions in a transparent and consumer friendly manner for unregulated sectors such as cement, steel, aluminum and captive power producers.
A total of 23.75 million mt of coal has been put on the block for the fiscal year 2016-17 for auctioning of linkages to consumers belonging to non-regulated sectors.
Prior to auctions, coal linkages were allocated on the recommendation of a government committee.
In the second tranche, linkage auctions for the cement sector would be auctioned with a volume of 2.15 million mt, scheduled to take place by the end of June, the CIL official said. Auctioning of linkages to other sectors is also in the offing.
